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Poland Country Risk Report Q1 2016

Poland Country Risk Report Q1 2016

Core Views

Poland’s robust real GDP growth will continue throughout 2016, driven mainly by household consumption, but also by government spending too.

The sharp drop in oil prices has led to a positive adjustment in Poland’s external accounts, although growing domestic demand will lead the current account deficit to widen in 2016.

The new Law and Justice government will result in a slight widening in the fiscal deficit and looser monetary policy.

Major Forecast Changes

On the back of the sharp drop in oil prices, we have upgraded our forecast for Poland’s current account deficit to just 0.1% of GDP in 2015.

We have downgraded our fiscal forecasts following the general election result of October and now expect the fiscal deficit to come in at 2.9% of GDP in 2016 (from 2.5% previously) and 3.0% in 2017 (from 2.0% previously).


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Parliamentary Election: Initial Thoughts
With Law and Justice leading Poland's next government, a slight widening of the fiscal deficit and looser monetary policy is now our
base case.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
A Maturing Regional Power
We consider Poland's long-term political risk profile to be on an upward trajectory, reflecting the country's maturing political institutions
and greater confidence in the conduct of external affairs. Solid macroeconomic fundamentals underpin our expectation for improvement
over the long run. Nevertheless, Poland still faces significant challenges to political stability in its external relations and at home.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Government To Expand Role In Economy
The incoming Law and Justice government will boost household consumption and the state's role in the economy, although fixed
investment may suffer.
TABLE: GDP BY EXPENDITURE
Fiscal Policy And Public Debt Outlook
PiS Victory Signals Wider Budget Deficits Ahead
We have revised down our fiscal deficit forecasts, anticipating a wider budget deficit as a result of the new Law and Justice government.
TABLE: FISCAL POLICY
Monetary Policy
Monetary Policy To Remain Looser For Longer
Monetary policy will be looser in 2016 as a result of the new Law and Justice government. While our core view remains that there will be
no rate hikes in 2016, the rise of deeper cuts and unorthodox monetary policy being implemented has risen.
TABLE: MONETARY POLICY
Currency Forecast
PLN: Strong Fundamentals Will Support Against Volatility
Although the new PiS government is likely to be negative in the short term for the zloty, a more sustained depreciation will be prevented
by the country's robust fundamentals.
TABLE: EXCHANGE RATE FORECASTS
Chapter 3: 10-Year Forecast
The Polish Economy To 2024
Long-Term Future Looks Bright
We forecast Polish real GDP growth to average 3.5% between 2016 and 2025 , down slightly from 4.0% between 2001 and 2011.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Education
TABLE: EMERGING EUROPE - EDUCATION RISK
TABLE: GRADUATES OF TERTIARY EDUCATION, 2008-2012
Government Intervention
TABLE: EMERGING EUROPE - GOVERNMENT INTERVENTION RISK
TABLE: PERSONAL INCOME TAX BRACKETS
Chapter 5: BMI Global Macro Outlook
Global Outlook
Exit The Dragon
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %

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