Back in December I raved about how low the GBP was to the PLN, at that time it was standing at around 4.99 zloty to the pound. We’re now in April and the zloty has strengthened such that the rate to the pound is around 4.2, the dollar at 2.2 and the euro at 3.4. I can’t help wondering where this will end and what the mix between tears and joy will be?
I won’t attempt to come over all economist on you but this significant change in the value of the zloty and the fact that it keeps getting stronger has some interesting effects at a personal level.
On the plus side. Any bills I have to pay in foreign currency are getting cheaper. I have a few regulars in both pounds and dollars and the savings are significant. Not to mention any internet shopping outside of Poland, also cheaper. Going on trips back to the UK, cheaper. Holiday in Spain later this year, mixed feelings. Spending money will be cheaper but you have to wonder if booking the thing (and paying deposit) in February was such a good idea? These things are priced in euro so for sure it’s costing me more than it could have done as the euro is sinking and I think my price in zloty is fixed. Another problemette, I want to convert some cash zlote into euro and pounds for spending money soon. Do I do it now while it’s 3.4 & 4.2 or do I wait? Which way are the euro and pound going to go between now and July/August I wonder?
Having seen how this year is going – here’s a tip for you, if you’re a gambling man. Book this year’s holiday ‘last minute’. I have a feeling the credit crunch is going to rip the arse out of the holiday market, luxury discretional spending, there’s going to be a mountain of holidays being sold off cheap this year and they may not even wait until the last minute to drop the prices.
One of the biggest plus sides to the strong zlote is this, and let this be a warning for every professional currently employed in Warsaw and paid in zloty. I got a mail from a guy who works for our company in Newcastle, UK. He wants to move on, get a bit of excitement, see the world, expand his horizons by coming out to central Europe. He’s talked to his boss, he’s talked to HR and when nothing much happened he mailed me direct to see if there are any opportunities. He’s a well educated guy with a good looking CV, the sort of person who would be very employable in the UK. I have wanted to get one more Brit into my team for years now, someone exactly like this guy, not for the reasons you might all jump to but for solid business reasons that there’s not enough time to get into. Just accept my word that this is not me employing a Brit because I like Brits better than Poles and yes, he can be effective without Polish language because of the high number of clients we have who are international and also the amount of cross border work we do. Anyway, in the past I would either not have bothered pursuing it or would have been told “no” by my boss on the basis that “ex-pats are too expensive”, or something.
Nevertheless, not being one to shy away from the right decision, I decided that I would actively chase this opportunity and had a few chats with the guy. Right from the off I laid my cards on the table – “Yes, this is a good move for you. Yes, I want you in my team (subject to….etc) but NO, there’s no ex-pat nonsense and I’ll pay you what I have already budgeted to pay a Pole to do the same job.”. My budget was based on actual salaries expected by Polish project managers (building surveyors) in Warsaw and has been substantiated by a further round of interviews from which I hope to employ another two Poles for exactly the same salary I offered Mr Newcastle. “Get your calculator out and divide this number by 4.4, I said”. He did and to my utter amazement he said very enthusiastically, “Yes, that sounds great!”. Now I’m wondering if I’m actually overpaying the guy!! Seriously though, the two worlds are now aligned – I can fish in the UK employment market and find good quality talent for the same price, in some cases even less, than I can employ often rather average staff in Warsaw. I’m shocked and a lot of people should be worried! They now cost the same as western Europeans, so no more rationalisation of poor performance by looking at the salary.
This works both ways of course and is one of the possible downsides of the FX movement. My salary is going through the roof! Obviously, for a pure Polish company it would be stable as I have had no pay rise but for a company who’s fees have been (until now) largely in euros and who’s European accounting is done in London (and therefore in pounds) anything priced in zlote is getting to be very expensive. Me included. We’re now on a push to get all fees into zloty, I’ve been trying to do that for a while anyway but it’s not so easy. This rate roller-coaster also makes negotiating with US clients a whole lot of fun. Had one last week who was insisting that the companies “metrics” suggest the price should be X USD per square metre. My price was higher and trying to close the gap, at a rate of 2.2, is pretty tough going!
Another interesting factor is all those “ex-pats” who are paid in something other than zloty. I was given this choice when I joined but have never really seen the point, nor been worried about the zloy, so was comfortable being paid in PLN. It seems that many others in town did not share my optimism and have been getting paid in pounds or euros. They have all seen their salaries dropping at an alarming rate and something like a small revolution has been going on back-stage with shouts of “We want zloty!!” being heard in the conference rooms of Warsaw.
Even shopping has taken on a new dimension. I needed to buy a new suit the other week after my only good one got torn to shreds on a Moscow building site a while back. I’m used to paying between 800 – 1,200 PLN for suit in Warsaw. Good enough for me, quality and price somewhere in the middle. This time I found myself thinking “That’s over 200 quid for suit (at 4.4)! Holy crap, I could fly to the UK buy a good suit and fly back for less money!”. Yes. Shopping is now making my brain ache. In the end I did one of my normal shopping “guerilla raids” in Marks & Spencer and picked up two suits for under 900 PLN. Nice one!
So, the strong zloty can be good or bad, or both at the same time but the main question is when is it going to stabilise or is it going to keep going and then fall off a cliff?
PS – I was going to title this “Are you a kantor does that say 4.2?”, but decided against it. ;)
By the way, you might want to exchange more currency at 20 East.