Moody’s upgrades Polish growth forecasts as zloty hits 7-month high

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Neither consumers nor investors are worried by political tensions in Poland, judging from developments on Monday, with ratings agency Moody’s lifting its economic growth forecasts while the zloty hit a seven-month high.

Moody’s currently has a negative outlook on Poland’s A2 sovereign credit rating, but analysts Michail Michailopoulos and Zuzana Brixiova said in an update today that the economy has shown “signs of a nascent turnaround of last year’s real GDP growth slowdown”.

Moody’s increased its forecast for real economic growth in 2017 to 3.2 per cent, from 2.9 per cent after a series of positive economic data.

Figures released last week showed seasonally-adjusted unemployment figures hitting a historic low of 7.7 per cent, which together with a healthy rise in wages point to an increase in private consumption.

Increasing momentum in the eurozone will also benefit the economy, thanks to rising exports to its key trading partner Germany, while higher utilisation of EU funds is expected to help investment.

The policies of Poland’s rightwing Law and Justice government – including curbs on courts and the media and a subsidy for families that is expected to cost around 1.2 per cent of GDP this year – prompted fears among many investors last year, and a ratings downgrade from S&P.

However, the economy’s resilience has boosted investor confidence, even as the government shows little sign of reversing course. Its relationship with the rest of the EU grew even more strained earlier this month when it tried to block the reelection of Donald Tusk as president of the European Council.

Despite that “awkward situation”, however, Commerzbank analyst Tatha Ghose said traders are showing signs of “fatigue after constant debate and discussions of Polish political risks over the previous year, which ultimately led to nothing significant”.

The zloty has rallied more than 3 per cent against the euro so far this year, and on Monday climbed a further 0.1 per cent. It hit a high of 4.2577 per euro, its strongest level since last August.

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