Macroeconomic Forecast Poland

Polish industrial output contracted by 4.3% y-o-y in June, a marginal improvement from -5.2% the previous month. Given our view that Poland's economic downturn will likely find a bottom at some point during Q209-Q309, the slowdown in the rate of output decline since the staggering 15.3% peak contraction in January certainly coalesces well with this view. We stress, however, that even if the output decline has reached its nadir in the current cyclical downturn, the road to recovery will still be slow. To be sure, with demand conditions in the eurozone constrained by the private sector balance sheet, Polish producers will struggle ramp up exports to its main trading partners. As such, we forecast industrial production to contract by 6.5% this year, with positive, albeit fairly anemic, growth of 2.1% in 2010.

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