BALTIC RIM ECONOMIES WEEKLY - PDF

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					 BALTIC RIM
 ECONOMIES WEEKLY
 July 28, 2010 No. 307

      •    Poland’s Finance Minister against too many privileges for foreign investors
      •    Retail sales in Poland surge, while unemployment drops
      •    EBRD: A key challenge in Poland - to preserve financial stability and to counteract the adverse
           effects on the real economy stemming from financing constraints
      •    Polish ports see H1 shipping-freight rate boost

Main Macroeconomic and Financial Indicators of POLAND
                                                                    2008        2009                      2009                              2010
                                                                                               Q2          Q3           Q4           Q1            Q2
Real sector
Real GDP, yoy, %                                                     5.0          1.7         1.2          1.2          3.5          2.9            :
Nominal GDP per capita, EUR thou                                     9.5          8.2         8.7          8.3          8.2          8.5            :
Industrial production index, wda, yoy, %1)                           2.0         -3.6         -6.2         -2.5         4.7         10.9           11.0
Volume index of construction production, wda, yoy, %                10.1          4.5         1.3          8.4          4.2         -15.5          1.8
Retail trade (excl. motor vehicles and motorcycles),                                                                                              -2.7
                                                                     5.0          2.9         3.6          2.1          0.4          0.4
deflated turnover index, yoy, %                                                                                                                (Apr-May)
Gross fixed capital formation, yoy, %1)                              8.2         -0.3         -1.5         -0.1         -0.3        -12.4           :
Prices
HICP, eop, yoy, %                                                    3.3          3.8         4.2          4.0          3.8          2.9           2.4
PPI, eop, yoy, %                                                     2.5          2.2         4.2          1.8          2.2         -2.6p          2.0p
Labour market
Average gross monthly earnings, yoy, %2)                            10.3          4.4         3.6          3.8          4.1          2.9           3.9
Unemployment rate, sa, LFS, %                                        7.1          8.2         8.0          8.5          8.9          9.7       9.8 (May)
External trade & external position
Exports of goods, yoy, %1)                                           7.8        -11.5        -16.7        -11.5         1.4         12.4            :
                             1)
Imports of goods, yoy, %                                             8.5        -16.4        -21.5        -15.3         -5.6        10.1            :
Current account balance, % of GDP                                   -5.1         -1.6         -1.5         -1.5         -3.1        -1.3            :
FDI inflow, % of GDP                                                 2.8          2.7         2.7          4.2          1.9          4.8            :
FDI per capita, eop, EUR                                           3040.7       3335.6       2970.2      3207.0       3335.6       3086.6           :
International reserves per capita, eop, EUR                        1157.4       1446.8       1249.0      1398.9       1446.8       1660.6        1833.4
Financial market
Average interest rates on new loans in LCU, eop, %                  11.4          9.7         10.7         10.6         9.7         10.1       9.9 (May)
Average interest rates on new term deposits in LCU,
                                                                     5.9          3.2         3.5          3.3          3.2          3.1       3.2 (May)
eop, %
Loans to households and non-financial corporations,                                                                                               14.3
                                                                    19.7          7.6         -4.0         -4.7         7.6         21.7
yoy, %3)                                                                                                                                         (May)
                                                                                                                                                  23.0
Housing loan portfolio, yoy, %3)                                    42.2         12.9         14.5         9.6         12.9         24.0
                                                                                                                                                 (May)
Loans to households and private non-financial
                                                                    40.0         50.3         43.1         47.9        50.1         51.2            :
corporations, eop, % of GDP
Deposits, yoy, %                                                    18.5         13.3         18.7         14.3        13.3          9.4           10.2
Economic sentiments
                                                                                                                                                   98.7
Economic sentiments, total index, eop                               95.5         93.7         85.7         89.5        93.7        101.5
                                                                                                                                                 (June)
                                                                                                                                                  -18.4
Consumer sentiments, eop                                            -18.2       -23.5        -20.8        -24.3        -23.5        -15.8
                                                                                                                                                 (June)
Note: Latest date is given in parenthesis; 1)at constant prices; 2) in enterprise sector; sectoral statistics has been adjusted to NACE 2; 3)denominated in
EUR; pprovisional data.
Abbreviations: GDP – gross domestic product; HICP – harmonized index of consumer prices; PPI – producer price index; FDI – foreign direct
investments; yoy – year-on-year; eop - end-of-period; LFS – Labour Force Survey; LCU – local currency units; wda - data adjusted by working days; sa –
seasonally adjusted; p Eurostat provision value.
Sources: National statistics office, Bank of Lithuania, ECB, Eurostat, European Commission




                                                                                                                                                          1
Structural Indicators of the BALTIC RIM ECONOMIES
                                                LITHUANIA                           LATVIA                      ESTONIA                         POLAND
                                                            2010                               2010                         2010                         2010
                                        2008      2009                     2008      2009                2008     2009                2008       2009
                                                             Q1                                 Q1                           Q1                           Q1
Main macro economic
indicators
Labour productivity: GDP in PPS
                                         62.0     55.6        :             52.0     49.9        :       63.8      63.8       :        62.0      65.1f     :
per employee, EU27 = 100
                              1)
Exports of goods and services ,
                                         12.2     -14.3      2.8            2.0      -15.5      4.6      -0.7     -11.2      11.3      7.1       -9.1    10.4
yoy, %

Comparative price index, EU27 =
                                         64.7     67.8        :             72.6     74.8        :       78.0      75.1       :        69.1      58.6      :
100
Average monthly gross earnings,
                                        671.7     613.5     588.3          705.3     620.9     608.2    838.3     783.5     758.3     878.3      824.7   837.1
eop, EUR
Unemployment rate, LFS, eop,
                                         8.2      15.9      17.4            10.3     19.8      20.0       7.7      15.6      19.0      7.0        8.9     9.7
sa, %

FDI per capita, eop, EUR                2731      2895      2917           3594      3629      3669      8856      8420     8815      3041       3336    3087
Public finance
General government revenue, %
                                         34.2     34.1      34.5            34.4     34.0      37.1      37.1      43.6      36.2      39.6      37.4    41.4
of GDP
Government consolidated gross
                                         15.6     29.3      35.6            19.5     36.1      43.0       4.6      7.2       7.2       47.2      51.0    51.9
debt, % of GDP
Fiscal balance, % of GDP                 -3.3      -8.9     -8.1            -4.1      -9.0     -7.9      -2.7      -1.7      -8.0      -3.7      -7.1    -2.6
Financial market
International official reserves, %
                                         36.5     36.7      38.0            43.9     58.8      66.0      34.5      33.6      32.0      27.9      31.7    34.3
of M2
Loans to households and private
non-financial institutions, eop, %       59.3     66.6      65.3            83.8     98.0      100.4     92.3     104.0     103.8      40.0      50.3    51.2
of GDP

Gross external debt, % of GDP            71.6     86.5      89.8           129.2     158.3     162.6    118.5     126.7     124.7      47.7      62.7    63.5

Note: Latest date are given in parenthesis; f Eurostat forecast;    1)
                                                                         at constant prices. Abbreviations: PPS – Purchasing Power Standards.
Sources: National statistics offices, National central banks, ECB, Eurostat, European Commission, International Monetary Fund




News from POLAND: Macroeconomics, Finance and Banking
                                     Poland's Finance Minister does not agree for subsidies for foreign investors who at the same time apply for
FinMin against too
                                     EU subsidies or are situated in special economic zones.
many privileges for
foreign investors                    More than half of 14 companies who applied for the total PLN 150 mn governmental support are threatened
                                     not to receive the subsidy.
July 28, 2010
(The Warsaw Voice)
                                     GDP will grow by 3.5%, with average inflation at 2.3% in 2011, according to budget guidelines passed by
Polish Government
Approves 2011 Budget                 the government in July. The unemployment rate is expected to fall to 9.9%, while employment is predicted
Guidelines                           rise by 1.9%.
                                     For the first time, the budget will be constructed according to the recently passed expenditure rule, which
July 26, 2010
                                     limits the rise of flexible expenses and new fixed expenses to the rate of inflation plus 1%. The budget
(WBJ)                                deficit next year is projected to be lower than PLN 40 bn. In the public sector, only teachers will see pay
                                     rises.
                                     The guidelines also assume that the PLN will strengthen and that the Monetary Policy Council will raise
                                     interest rates.
                                     Economists expect similar results for next year, although some stress that a drop in the unemployment rate
                                     to 9.9% from the present 11.6% will require higher economic growth than the government predicts.

                                     Poland's retail sales grew at a rate of 6.4% yoy in June 2010 and 4.1% mom.
Retail sales in Poland
up sharply, while                    Sales of furniture, appliances and electronics increased by an impressive 19.7% with sales of
unemployment drops                   pharmaceuticals and cosmetics growing by 20.4%.
July 23, 2010                        Clothes and shoes sales were a little further behind at 12.2%, with cars sales at 8.5% yoy.
(WBJ)
                                     Polish sea ports' transshipment rates have increased significantly in the first half of 2010, at a time when
Polish ports see H1
shipping-freight rate                global shipping levels have dropped alarmingly.
boost                                Polish ports handled up to one third more freight in H1 of 2010 than they did in the corresponding period
                                     last year and operators are hoping that the rebound will allow them to at least partially recoup losses
July 20, 2010
                                     suffered in H1 2009, at the height of the global economic crisis. Last year transshipment levels dropped
(Warsaw Business
                                     7.3% in Polish ports.
Journal)
                                     Ports of Szczecin and Świnoujście have seen a 36.6% yoy increase of goods handled, while the port of
                                     Gdynia has seen an increase of 13%. Both exceeded port operators' expectations, although Gdynia port
                                     officials say the level is still not sufficient to overturn losses made last year.




                                                                                                                                                               2
The Big Mac Index                                                                                                                   ANNEX I
                                                                                                                                 Under(-)/
                                                                                                                                   over(+)
                                                                                                                                  valuation
                                                                                     Implied              Actual dollar            against
                                         Big Mac prices*                            PPP† of the            exchange              the dollar,
                                 in local currency   in dollars                       dollar             rate July 21st              %
  United States‡                                $ 3.73              3.73
  Argentina                                 Peso 7.00               1.78                 1.88                   3.93                  -52
  Australia                                    A$ 4.35              3.84                 1.17                   1.13                    3
  Brazil                                     Real 8.71              4.91                 2.33                   1.77                   31
  Britain                                       ₤ 2.29              3.48                1.63§                  1.52§                   -7
  Canada                                       C$ 4.17              4.00                 1.12                   1.04                    7
  Chile                                   Peso 1,750                3.34                 469                    524                   -10
  China                                     Yuan 13.2               1.95                 3.54                   6.78                  -48
  Colombia                                Peso 8,200                4.39                2,196                  1,868                   18
  Costa Rica                           Colones 2,000                3.83                 536                    522                     3
  Czech Republic                         Koruna 67.6                3.43                 18.1                   19.7                   -8
  Denmark                                     DK 28.5               4.90                 7.63                   5.81                   31
  Egypt                                   Pound 13.0                2.28                 3.48                   5.70                  -39
  Estonia                                Kroon 32.0                 2.62                8.57                   12.2                   -30
  Euro area**                                   € 3.38              4.33                1.10††                 1.28††                  16
  Hong Kong                                  HK$ 14.8               1.90                 3.96                   7.77                  -49
  Hungary                                   Forint 740              3.33                 198                    222                   -11
  Indonesia                            Rupiah 22,780                2.51                6,102                  9,063                  -33
  Israel                                 Shekel 14.9                3.86                 3.99                   3.86                    3
  Japan                                          ¥ 320              3.67                 85.7                   87.2                   -2
  Latvia                                    Lats 1.55               2.80                0.42                   0.55                   -25
  Lithuania                                Litas 7.30               2.71                1.96                   2.69                   -27
  Malaysia                               Ringgit 7.05               2.19                 1.89                   3.21                  -41
  Mexico                                    Peso 32.0               2.50                 8.57                   12.8                  -33
  New Zealand                                NZ$ 5.00               3.59                 1.34                   1.39                   -4
  Norway                                 Kroner 45.0                7.20                 12.1                   6.25                   93
  Pakistan                                 Rupee 210                2.46                 56.3                   85.5                  -34
  Peru                                        Sol 10.0              3.54                 2.68                   2.83                   -5
  Philippines                                Peso 102               2.19                 27.3                   46.5                  -41
  Poland                                  Zloty 8.30                2.60                2.22                   3.20                   -30
  Russia                                 Rouble 71.0                2.33                 19.0                   30.4                  -38
  Saudi Arabia                              Riyal 10.0              2.67                 2.68                   3.75                  -29
  Singapore                                    S$ 4.23              3.08                 1.13                   1.37                  -18
  South Africa                              Rand 18.5               2.45                 4.94                   7.54                  -34
  South Korea                              Won 3,400                2.82                 911                   1,204                  -24
  Sri Lanka                                Rupee 210                1.86                 56.3                   113                   -50
  Sweden                                      Skr 48.4              6.56                 13.0                   7.37                   76
  Switzerland                                 SFr 6.50              6.19                 1.74                   1.05                   66
  Taiwan                                     NT$ 75.0               2.34                 20.1                   32.1                  -37
  Thailand                                  Baht 70.0               2.17                 18.8                   32.3                  -42
  Turkey                                     Lira 5.95              3.89                 1.59                   1.53                    4
  UAE                                   Dirhams 11.0                2.99                 2.95                   3.67                  -20
  Ukraine                               Hryvnia 14.5                1.84                 3.88                   7.90                  -51
  Uruguay                                   Peso 79.0               3.74                 21.2                   21.1                   nil
   Note: *At current exchange rates †Purchasing-power parity; local price divided by price in United States ‡Average of Atlanta, Chicago, New York and
   San Francisco §Dollars per pound **Weighted average of prices in euro area ††Dollars per euro

   Source: McDonald’s, The Economist




                                                                                                                                             3
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  ANNEX II

Interbank                                                                                             3-month interbank interest rates, %                                                                                                                                                                                                                                                                               12-month interbank interest rates, %
                30
interest                                                                                                                                                                                                                                                                                                                     25

rates
                25
                                                                                                                                                                                                                                                                                                                             20



                20
                                                                                                                                                                                                                                                                                                                             15


                15

                                                                                                                                                                                                                                                                                                                             10

                10


                                                                                                                                                                                                                                                                                                                              5
                 5



                                                                                                                                                                                                                                                                                                                              0
                 0




                                                                                                                                                                                                                                                                                                                                  2009.06


                                                                                                                                                                                                                                                                                                                                                            2009.07



                                                                                                                                                                                                                                                                                                                                                                                    2009.08



                                                                                                                                                                                                                                                                                                                                                                                                              2009.09


                                                                                                                                                                                                                                                                                                                                                                                                                                       2009.10



                                                                                                                                                                                                                                                                                                                                                                                                                                                                2009.11


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         2009.12



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               2010.01



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      2010.02


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            2010.03



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 2010.04


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      2010.05



                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         2010.06


                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             2010.07
                     2009.06


                                           2009.07


                                                                    2009.08


                                                                                           2009.09


                                                                                                                 2009.10


                                                                                                                                        2009.11


                                                                                                                                                            2009.12


                                                                                                                                                                                  2010.01


                                                                                                                                                                                                       2010.02


                                                                                                                                                                                                                       2010.03


                                                                                                                                                                                                                                            2010.04


                                                                                                                                                                                                                                                                2010.05



                                                                                                                                                                                                                                                                                     2010.06


                                                                                                                                                                                                                                                                                                          2010.07
                                     EURIBOR                                                          TALIBOR                                                         RIGIBOR                                                    VILIBOR                                               WIBOR                                                      EURIBOR                                                                   TALIBOR                                                                 RIGIBOR                                                             VILIBOR                                                 WIBOR




Exchange                                                                      EUR/USD                                                                                                                                                                                                                                                                                               PLN/USD**                                                                                                                               PLN/EUR*
rates           0.85                                                                                                                                                                                                                                                                                                         4.0                                                                                                                                                                                                                                                                                                                             5.0



                                                                                                                                                                                                                                                                                                                             3.7                                                                                                                                                                                                                                                                                                                             4.8

                0.80

                                                                                                                                                                                                                                                                                                                             3.4                                                                                                                                                                                                                                                                                                                             4.6



                0.75                                                                                                                                                                                                                                                                                                         3.1                                                                                                                                                                                                                                                                                                                             4.4



                                                                                                                                                                                                                                                                                                                             2.8                                                                                                                                                                                                                                                                                                                             4.2

                0.70

                                                                                                                                                                                                                                                                                                                             2.5                                                                                                                                                                                                                                                                                                                             4.0



                0.65                                                                                                                                                                                                                                                                                                         2.2                                                                                                                                                                                                                                                                                                                             3.8
                           2009.01

                                          2009.02

                                                          2009.03

                                                                              2009.04

                                                                                            2009.05

                                                                                                          2009.06

                                                                                                                              2009.07

                                                                                                                                              2009.08

                                                                                                                                                          2009.09

                                                                                                                                                                        2009.10

                                                                                                                                                                                             2009.11

                                                                                                                                                                                                         2009.12

                                                                                                                                                                                                                   2010.01

                                                                                                                                                                                                                                  2010.02

                                                                                                                                                                                                                                                      2010.03

                                                                                                                                                                                                                                                                2010.04

                                                                                                                                                                                                                                                                          2010.05

                                                                                                                                                                                                                                                                                               2010.06

                                                                                                                                                                                                                                                                                                              2010.07




                                                                                                                                                                                                                                                                                                                                        2009.01

                                                                                                                                                                                                                                                                                                                                                        2009.02

                                                                                                                                                                                                                                                                                                                                                                          2009.03

                                                                                                                                                                                                                                                                                                                                                                                          2009.04

                                                                                                                                                                                                                                                                                                                                                                                                         2009.05

                                                                                                                                                                                                                                                                                                                                                                                                                             2009.06

                                                                                                                                                                                                                                                                                                                                                                                                                                                 2009.07

                                                                                                                                                                                                                                                                                                                                                                                                                                                               2009.08

                                                                                                                                                                                                                                                                                                                                                                                                                                                                               2009.09

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   2009.10

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                2009.11

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            2009.12

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  2010.01

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 2010.02

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            2010.03

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            2010.04

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           2010.05

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      2010.06

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   2010.07
Changes per                                                                                                            EUR                                                                                                             EEK                                                                                                  LVL                                                                                                                                LTL                                                                                                                       PLN
week           2010.07.27
               EUR                                                                  1.0000                                              -                                                              15.6466                                          =                                                                 0.7091                     ↑                                                                                 3.4528                                                  =                                                                           4.0125                                    ↓
               USD                                                                  0.7701                                              ↓                                                              12.0487                                         ↓                                                                  0.5460                     ↓                                                                                 2.6589                                                 ↓                                                                            3.0861                                    ↓

                Note: * - scale on the right; ** - scale on the left



Commodity                                                                                         Brent-oil price dynamics, USD/barrel                                                                                                                                                                                                                                                                                        Gold price dynamics, USD/ounce
prices          90                                                                                                                                                                                                                                                                                                           1300


                                                                                                                                                                                                                                                                                                                             1250

                80
                                                                                                                                                                                                                                                                                                                             1200


                                                                                                                                                                                                                                                                                                                             1150
                70

                                                                                                                                                                                                                                                                                                                             1100


                60                                                                                                                                                                                                                                                                                                           1050


                                                                                                                                                                                                                                                                                                                             1000
                50
                                                                                                                                                                                                                                                                                                                              950


                                                                                                                                                                                                                                                                                                                              900
                40

                                                                                                                                                                                                                                                                                                                              850

                30                                                                                                                                                                                                                                                                                                            800
                     2009.01

                                     2009.02

                                                     2009.03

                                                                         2009.04

                                                                                        2009.05

                                                                                                       2009.06

                                                                                                                           2009.07

                                                                                                                                            2009.08

                                                                                                                                                        2009.09

                                                                                                                                                                      2009.10

                                                                                                                                                                                            2009.11

                                                                                                                                                                                                       2009.12

                                                                                                                                                                                                                   2010.01

                                                                                                                                                                                                                                  2010.02

                                                                                                                                                                                                                                                      2010.03

                                                                                                                                                                                                                                                                2010.04

                                                                                                                                                                                                                                                                           2010.05

                                                                                                                                                                                                                                                                                                2010.06

                                                                                                                                                                                                                                                                                                                2010.07




                                                                                                                                                                                                                                                                                                                                                  2009.01

                                                                                                                                                                                                                                                                                                                                                                      2009.02

                                                                                                                                                                                                                                                                                                                                                                                    2009.03

                                                                                                                                                                                                                                                                                                                                                                                                    2009.04

                                                                                                                                                                                                                                                                                                                                                                                                                        2009.05

                                                                                                                                                                                                                                                                                                                                                                                                                                           2009.06

                                                                                                                                                                                                                                                                                                                                                                                                                                                           2009.07

                                                                                                                                                                                                                                                                                                                                                                                                                                                                          2009.08

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               2009.09

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             2009.10

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          2009.11

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                2009.12

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              2010.01

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            2010.02

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           2010.03

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          2010.04

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     2010.05

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   2010.06

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   2010.07




Source: Reuters, EcoWin

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