At its November sitting, Poland’s central bank, the NBP, surprised market watchers with an earlier than expected rate cut of 25 basis points.  This puts the reference rate at 5.75% and officially ends a tightening cycle which began in April 2007 and saw 2% added to the rate by the time of the last hike in June of this year.

The rate of unemployment fell in October to 8.8%, continuing the downward trend observed over the past few years. Economic observers expect a rise in unemployment in 2009.

The slowdown underway in Western Europe is beginning to have an effect on Poland.  Polish retail sales grew 7.9% year on year in September, lower than the 9% expected, largely on the back of slower car and fuel sales.

Industrial orders declined in October. Month on month, new orders were down by 4.5%. Another sector experiencing signs of a slowdown is construction, with the issue of new building permits down by 2.4% in the first 9 months of 2008. The number of apartments under construction in Poland during this period stood at 715 000, up 4.8% year on year.

During the first three quarters of 2008, investment spending by firms with more than 50 employees was strong, standing at 72bn PLN, an increase of 7.9% year on year. Such strong numbers are not expected to be repeated in the last quarter of this year and into 2009.

Wage growth in Poland also seems to be easing in Poland, in line with falling GDP growth and the poorer outlook for company profits.

Next year promises to be a challenging one for the world, with negative growth in most developed economies, including the EU region as a whole. Poland will not be immune, but should still show relatively strong GDP growth.

One of the major keys to the direction of the property market will be the willingness on the behalf of Polish banks to lend for new purchases. In general, Polish banks are considered to be cautious. This has been positive, as there has been no exposures to toxic debt which have blighted banks in the US, UK and Western Europe. However, there has been a restriction of bank’s offer in recent months, and these restrictions need to be lifted in 2009 for the property market to recover.

The current fall in new investment from Polish developers will also have a positive effect in 2009-2010 as supply of new apartments will again be restricted, resulting in the potential for increases in price.

Andrew Balfour