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Poland Country Risk Report Q2 2015

Poland Country Risk Report Q2 2015

Core Views

Poland's economic recovery is now in full swing as domestic demandgathers momentum. We have upgraded our growth forecasts onthe back of stronger exports, as the weak euro and low oil pricesstimulate demand across the German supply chain.

Poland's external position remains relatively strong, and we estimatethe current account deficit arrived at just 1.3% of GDP in 2014. Alarge stock of foreign-owned government paper and ongoing privatesector deleveraging represent the two major risks to our sanguineoutlook.

We continue to expect the Civic Platform (PO)-led government toserve out its term under new Prime Minister Ewa Kopacz. We alsobelieve that the opposition will struggle to broaden its appeal despitethe government's rising unpopularity, limiting its ability to challengethe ruling coalition.

Major Forecast Changes

We have revised our policy rate forecasts for 2014 and 2015, andnoWexpect a further 25bps of cuts in 2015, taking the policy rate to1.75%.

We calculate the current account deficit came in at 1.3% of GDP in2014, from a previous forecast of 1.6%.


Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Influence Abroad To Wane
Poland's foreign policy influence will wane following the appointment of Prime Minister Ewa Kopacz, who will focus mainly on domestic
issues. However, Poland's fiscal outlook remains solid ahead of the October parliamentary election.
TABLE: Political Overvie w
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 Activity
Recovery Entering Full Swing
Poland's economic recovery in now in full swing as domestic demand gathers momentum. We have upgraded our growth forecasts on
the back of stronger exports, as the weak euro and low oil prices stimulate demand across the German supply chain.
TABLE: GDP By Expenditure
Balance Of Payments
Domestic Demand To Drive Deficit Wider
Poland's current account deficit will widen in 2015, driven by cyclical - rather than structural - trends. The impact of the Russian
embargo on EU agricultural goods has not materially affected Poland's trade accounts.
TABLE: Current Account
Monetary Policy
Deflation Will Prove Transient
We maintain our forecast for the National Bank of Poland to lower the policy rate by 25 basis points to 1.75% in Q115. However, we
think rate cuts beyond this are unlikely. Prevailing deflationary trends will prove transient, and there are no indications that the recovery
in domestic demand is stalling.
TABLE: Moneta ry Polic y
Banking Sector
Well Positioned To Benefit From Recovery
Poland's banking sector remains one of the strongest in emerging Europe, and should continue to benefit from the economic recovery.
Nonetheless, macro-prudential measures laid down by the central bank and falling interest rates may pressure short-term profitability. 8
Chapter 3: 10-Year Forecast
The Polish Economy To 2024
Long-Term Future Looks Bright
We forecast Polish real GDP growth to average 3.4% between 2014 and 2024, down slightly from 4.0% between 2001 and 2011.
Poland is well placed to avoid the pitfalls of the middle income trap and continue benefitting from large catch-up growth with the rich EU
economies.
TABLE: Long -Term Mac roeconomic Forecasts
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: Ope rational Risk
Availability Of Labour
TABLE: Eme rging Europe - Availabilit y Of Labou r Risk
TABLE: Top 10 Sou rce Count ries For Mig rant Wo rke rs
TABLE: Labou r Force Emplo yment By Secto r ('000),
Crime Risk
TABLE: Eme rging Europe - Crime Risk
TABLE: Crime Statistics
Chapter 5: Key Sectors
Automotives
table : Autos Total Market - Histo rical Data And Forecasts
Food & Drink
table : Food Consumption Indicato rs - Histo rical Data & Forecasts
Other Key Sectors
TABLE: Oil and Gas Secto r Key Indicato rs
TABLE: Pha rma Secto r Key Indicato rs
TABLE: Inf rast ructu re Secto r Key Indicato rs
TABLE: Telecoms Secto r Key Indicato rs
TABLE: Defence and Secu rit y Secto r Key Indicato rs
TABLE: Freight Key Indicato rs
Chapter 6: BMI Global Assumptions
Global Outlook
Weaker EMs To Weigh On Growth
Table : Global Assumptions
Table : Developed States , Real GDP GrowtH, %
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
Table : Eme rging Markets , Real GDP Growth , %

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