Poland: Europe s economic outperformer. Piotr Bujak Chief Economist at Nordea Bank Polska PKO Bank Polski Group. Copenhagen, 29 April 2014

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1 Poland: Europe s economic outperformer Piotr Bujak Chief Economist at Nordea Bank Polska PKO Bank Polski Group Copenhagen, 29 April 2014

2 Poland crisis-proof economic front-runner % Cumulated real GDP growth (1995=100) Poland Hungary Czech Republic Slovakia Romania Denmark IMF WEO Forecast Source: IMF World Economic Outlook

3 EU funds fuel economic growth: focus shift to private investment EU funds inflows to Poland Distribution of funds between public and private sectors Source: Mininstry of Infrastructure and Development, PKO Bank Polski. 3

4 Free floating and undervalued exchange rate Market EURPLN rate against exports break-even EURPLN rate Source: NBP, PKO Bank Polski. 4

5 Favourable structure of foreign trade Poland's exports by countries in 2013 (% of total) Others; 35 Germany; 25 UK; 6,5 Slovakia; 2,6 Sweden; 2,7 Ukraine; 2,8 Netherlands; 4 Italy; 4,3 France; 5,6 Russia; 5,3 Czech Republic; 6,2 Source: Polish stats office, Nordea Markets Source: GUS, PKO Bank Polski. 5

6 Fiscal policy absorbed adverse external shock Fiscal balance Fiscal policy to boost growth in 2014 as fiscal drag is receding Poland Euro area 2,0 1,5 1,0 0,5 Change in real GDP growth (%pt), 2014f* EZ PL US -6 0,0 R² = 0, %GDP Source: IMF World Economic Outlook ,5 Change in fiscal thrust^ (% of GDP), 2014f* -1,0-3,0-2,5-2,0-1,5-1,0-0,5 0,0 0,5 1,0 1,5 2,0 Source: IMF Fiscal Monitor (October 2013) and IMF WEO (*forecasts). ^Fiscal thrust defined as change in the cyclically-adjusted primary balance (CAPB). Note: the chart presents change in the fiscal thrust (ie, change of change in CAPB). CH 6

7 More room for fiscal stimulation Public debt (2013) More room for fiscal stimulation created thanks to changes in the pension system %GDP Public debt (domestic methodology) Public debt threshold Public debt excl. debt in pension funds portfolio (domestic methodology) Source:Eurostat Source: GUS, Ministry of Finance, PKO Bank Polski 7

8 No overhang of excessive private sector debt % of GDP % of GDP Private sector debt Poland EU average Germany Source: Eurostat 8

9 No overhang of excessive private sector debt Private sector debt (2013) Source:Eurostat 9

10 Improving quality of institutions World Bank s Doing Business Ranking Corruption Perception Index Romania Hungary Czech Republic Poland Slovakia Denmark Denmark Poland Slovakia Romania Hungary Czech Republic Source: World Bank Source: Transparency International 10

11 Poland s international labour cost competitiveness improves Poland s real unit labor cost against Nordic countries* *Unit labour costs, Real, ratio of compensation per employee to nominal GDP per person employed, Index, 2005=100 Source: ECFIN, Reuters 11

12 Cyclical recovery improving external environment 8 6 % y/ y GDP growth forecasts Germany Poland World Source: IMF World Economic Outlook 12

13 Cyclical recovery fiscal stimulation 4 3 Poland s GDP growth vs changes in fiscal policy position %GDP/ pp, y/ y global crisis Change in GDP growth rate (pp, y/ y) Change in EU funds inflow and primary structural deficit (%GDP, y/ y) Source: Eurostat, Ministry of Regional Development, PKO Bank Polski 13

14 Cyclical recovery accommodative monetary policy 8 % Key policy rate in Poland forecast Source: GUS, NBP, PKO Bank Polski NBP reference rate Taylor Rule (* ) 14

15 Thank you for your attention!

16 Disclaimer This material has been prepared for informational purposes only and is provided to PKO BP SA Group clients. It is not an offer (as understood under the Civil Law of 23rd April 1964) to buy or sell or the solicitation of an offer to buy or sell any financial instrument and does not constitute the provision of investment, legal or tax advice. It is also not intended to provide a sufficient basis on which to make an investment decision. The above information has been obtained from or based upon sources believed to be reliable, but PKO BP SA Group does not warrant its completeness or accuracy. PKO Bank Polski Group strongly recommends that clients independently evaluate particular investments and accepts no liability for the financial effect of its clients investment decisions. The above information is prepared and/or communicated by Powszechna Kasa Oszczedności Bank Polski S.A., registered in the District Court for the Capital City of Warsaw, 13th Commercial Division of the National Court Register under KRS number , Tax Identification Number (NIP): , REGON: , share capital 1,250,000,000 PLN and Nordea Bank Polska S.A., registered in the District Court for Gdańsk-Północ, 7th Commercial Division of the National Court Register under KRS number , Tax Identification Number (NIP): , REGON: , share capital 277,493,500 PLN. 16