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Polish Industrial Production Recovers

James Boston
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Polish Industrial Production Recovers

Polish Industrial Production has picked up again in July following an unexpected fall the previous month. The current year on year increase is now 2.3%, up from the -1.7% contraction experienced the previous month, market expectations for a 2.2% rise were however missed. Additionally, the Producer Price Index in the country has declined to read at –2.0% in July following a June fall of -1.7%, markets were anticipating a fall of -1.8% in these latest figures.

Poland, the largest economy in eastern Europe, has announced that it anticipates the current Ukrainian crises to slash up to 0.6% of it’s 2014 growth prospects. In retaliation for sanctions by the European Union, Russia embargoed the importation of Polish fresh fruit and vegetable produce, in total Poland’s exports to Russia have fallen by 7% and it’s exports to the Ukraine by over 25%.

Although no economy wants to undergo a downward revision to it’s growth forecasts, particularly not one of over half a percentage point, the Polish economy is in the fortunate position that it can currently withstand such a blow and still finish the year with healthy expansion. The Central Bank is currently guiding 2014 GDP growth to be in the region of 3.2% implying that despite the turmoil among some of it’s key trading partners the economy can still achieve a growth rate of above 2.5% this year.

A shock to the economy such as this may well in fact provide the Central Bank with the reason it needs to cut interest rates which have remained at 2.5% since July of last year, during which time the inflation rate has fallen from over 1.2% to reach negative territory last month of -0.2%. The preferred way forward for Poland would no doubt be a swift resolution of the Ukrainian situation but in the event that this is unlikely the central European country is well positioned to weather the storm.

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