Rising unemployment and weak wage growth took their toll on Poland's consumers last month, data showed on Friday, but the EU's largest ex-communist economy is expected to maintain modest growth in the third quarter. Retail sales rose by 2.5 percent year-on-year in September, less than an economists' forecast of 4.0 percent and well below the 5.2 percent increase reported for August, the statistics office (GUS) data showed.
Unemployment edged up to 10.9 percent last month from 10.8 percent in August, GUS said, slightly less than expected, but the government expects it to reach 12.5 percent by year-end. "Retail sales are much weaker than expected, while unemployment was a positive surprise. It looks like consumer power is running out slowly because of a real fall in payrolls and still weak credits," said Arkadiusz Krzesniak chief economist at Deutsche Bank in Warsaw.
"September is a very important month on the sales front because it shows the trend for the last few months of the year. It looks like retail sales will stabilise at around 2 percent year-on-year," said Krzesniak. Highlighting concerns over rising joblessness, thousands of workers joined a protest on Friday organised by the Solidarity trade union in the western city of Poznan against the closure of a factory that had supplied now-bankrupt Polish shipyards.
Despite the gloomy data, Poland remains the only economy in the European Union's eastern wing to avoid recession this year and officials said they expected it to have grown in the third quarter by not less than the 1.1 percent seen in April-June. "The dynamics of gross domestic product (GDP) growth in the third quarter should not be below that seen in the second quarter," Halina Dmochowska, deputy head of the statistics office, told a news conference on Friday.
POLAND OUTPERFORMS PEERS Earlier this week, the Finance Ministry forecast GDP growth in the third quarter at 1.2 percent and growth for the whole of 2009 at 1.2 to 1.3 percent, helped by the start of a recovery in industrial output.
Although Polish GDP growth is sharply down from the 5.0 percent posted in 2008, it compares very well with expected contractions this year in the Czech and Hungarian economies of 4.3 percent and 6.7 percent respectively. Poland relies much less on exports than its smaller neighbours.
Poland has also outperformed the euro zone, the main destination for ex-communist central Europe's exports, and Britain, where data on Friday showing the economy shrank 0.4 percent in the third quarter shocked financial markets.
However, like most of Europe, Poland faces a tough task rescuing public finances hit by the slowdown. The general government deficit will touch 6.3 percent of GDP in 2009, more than twice the EU's 3 percent ceiling, GUS said on Thursday, complicating Poland's plans to adopt the euro.
The tax hikes and cuts in public spending the government has said may be required from 2011 threaten to derail what may still be a relatively fragile recovery, economists say. While Poland delays painful fiscal tightening for now because of elections due next year and in 2011, the Czech Republic has already embraced tax increases and spending cuts in its 2010 draft budget to bolster its state finances. On Friday, the Czech parliament approved in the first of three readings a draft which envisages a 5.3 percent deficit after the economic crisis hammered profits at Czech export-oriented firms, slashing tax revenues.
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