Polish recession update

Looking through my backlog of ‘Poland AM’ news briefs I get a mixed view of how Poland is bearing up so far although the general tone is one of either already being in trouble, or preparing for it.

January 21st

Another large concern is considering using Poland as a potential location for its BPO center, namely Sony Entertainment. “It concerns a financial and accounting services center for CEE, which would employ 200-400 persons.

On Tuesday afternoon BRE Bank admitted that in Q4 2008 it posted a gross profit of less than zł.50 million, which is one of the worst results in its history.

Furniture group Ikea is considering more investments in Poland and within the next eight years it might designate zł.6 billion for plants, commercial centers and stores.

Due to the financial crisis delicatessen chain Alma Market is resigning from foreign expansion plans, but it expects to continue investments in Poland.

The bank [Allied Irish Bank] was apparently looking for financial assistance among investors, but none of them was willing to help. Due to this one of the solutions would be to sell its crown jewel, namely BZ WBK, whose value on Tuesday was four times higher than that of its parent company. According to experts, AIB might receive more for selling its shares in BZ WBK than it would receive from the Irish government, as the sale could net AIB zł.7-8 billion.

Budget revenues in 2008 were around 10% lower than anticipated……… Finance Ministry officials blame the global economic crisis. “It can be seen clearly that enterprises have begun preparations for worse times and started to limit purchases,” said Deputy Finance Minister, Elżbieta Suchocka-Roguska.

January 22nd

According to the the latest research data from recruitment company Antal International, more than half of domestic companies will soon be looking for new specialists, as the global financial crisis will not have a strong effect on the trade sector.

TPSA is preparing for a possible revision of the strategy it had approved two years ago, which could see it suspend acquisition plans and put more stress on saving. “At the end of March we shall know whether or not we will have to update our strategy due to the current uncertain climate,” said TP management board member Ireneusz Piecuch.

The management board of BZ WBK has dismissed speculation by Parkiet that the institution could be sold by its owner, Allied Irish Bank. “The bank will remain an element of the AIB group, while our strategic investor will dispose of neither part nor all of its shares,”

10% – is the anticipated drop in production of cars in Poland in 2009, according to PwC.

zł.1.5 billion – is the estimated growth in the value of EU funds, which must be used by Poland by the end of June 2009 due to the strengthening Euro exchange rate over July-December 2008.

January 23rd

Economy Minister Waldemar Pawlak is looking for ways to solve the credit crunch and announced during an interview yesterday that it would be a good idea if the state refunded 30% of installments on mortgage loans for those who have problems with repaying their debt. Moreover, those who would need an initial down payment, could count on a cheaper loan from the state. The problem with the plan is that it was not consulted with the Civic Platform (PO), the main party in the PO-PSL (Polish Peasant Party) coalition. It was revealed that PO deputies as well as market experts agree that such a scenario is impossible, as the state will not have funds for such a bold move for at least two years.

Alior Bank has already raised deposits of over zł.1 billion, while the number of accounts opened with the institution reached 63,000 within two months. “This means that the pace of creating the deposit base was double what we expected. We achieved this despite the difficult situation on the financial markets,” said Wojciech Sobieraj, president of Alior.

Thursday was a bad day for shareholders of copper giant KGHM as the market was buzzing with speculation that its earnings will only amount to a fraction of its 2008 level. As a result, KGHM’s capitalization sunk by zł.600 million. “No comment,” said the investor relations office of the copper concern.

The outlook for the global as well as the domestic economies is very poor, and the European Commission warned that still this year the budget deficit in Poland could rise to 3.6% of GDP. This would mean that meeting one of the main Maastricht criteria to join the euro zone will not be fulfilled. Nevertheless the government continues to try to convince the market that the euro will be adopted in 2012. Admitting there were problems, Finance Minister Jacek Rostowski declared, “It is possible that we might join the ERM2 system not in the first but in the second half of the year.” Earlier rumors appeared on the market that Poland is considering postponing the date of introducing the euro, and as a result the złoty lost value in relation to a number of main currencies.

The justice system is increasingly feeling the crisis, as local courts have found themselves on the verge of bankruptcy. “At the beginning of the year we received money to cover bills for last year. Now we have z³.53 on our bank account,” said Judge Barbara du Chateau from the district court in Lublin, “We are waiting for money which will be used to pay wages, they should be here on January 26. If something will be left from the z³.2.4 million, we will also pay bills and interest for late payments,” she continued. This situation is repeating itself across the country, from Warsaw to Rzeszów. The Justice Ministry explains that due to the financial crisis the Finance Ministry has not transferred enough funds to their bank accounts, however the spokesperson for the Ministry ensures that the situation does not threaten the courts’ daily operations.

The cost of living in Warsaw has risen by 15% in the last year and is now catching up with other western European capitals in terms of cost of living. The Mercer consultancy company, which compared 143 cities across the world, regarding cost of housing, public transport, food, clothes, entertainment and domestic appliances, found that Warsaw residents have to pay more for day-to-day items than people living in Berlin or Brussels. Warsaw is now the 35th most costly capital to live in – one year ago it was 67th. The average employee earns three or four times less in Poland than they get in Germany.

January 26th

Limitless Polska [Arabian money] has begun purchasing land for its New City project in Chrzanów, but it also discussing purchasing terms for land in Warsaw and Wroc³aw, plus analyzing Katowice and more. “In strategic terms we are interested in large Polish cities, such as Warsaw, Poznań, Wrocław, Katowice and Kraków,” said Barbara Pleban of Limitless Polska. “Our mission is to build housing estates – cities for a several dozen thousand inhabitants, with schools, kindergartens, theatres, cinemas, offices, and more.”

As of March the Irish no frills airline Ryanair will liquidate 12 connections from six Polish cities. Representatives of the firm justified the move citing growing navigation fees, which were introduced in Poland in 2008.

Wojciech Mroczyñski, management board member of restaurant operator AmRest, fears that Sfinks, in which the firm owns a 33% stake, may go bankrupt if it does not have its equity boosted during the general shareholders meeting on February 18. Furthermore, if suspected irregularities in the firm’s financial situation are substantiated, AmRest might demand compensation from Sfinks’ former management board and the chairman of its supervisory board, which AmRest has already accused of dishonesty.

The Government hopes that 2009 will see Special Economic Zones (SSE) attract investments of zł.9.5 billion, which would put expenditures only 20% lower than the record high of more than zł.12 billion seen in 2008. With the financial crisis at the top of its mind, the Economy Ministry is planning to accelerate work on the expandsion of the SSE, which was enabled with last year’s regulation amendment. According to Rzeczpospolita’s preliminary estimates, the number of permits to operate in the zones will drop from over 200 in 2008 to around 140 in 2009, while the total value of investments would halve to zł.6.2 billion. According to the Ministry’s plan, the total area occupied by the SSE should increase to 13,900 ha by the end of the year, which should help offset the effects of the economic crisis. That said, the SSE is already feeling its effects, with investors starting to adjust their plans.

In a bid to limit mass redundancies, employers and the Economy Ministry have proposed changes to the labor code which could include the lowering of salaries. Over the weekend, the Ministry revealed several policies which suggest limiting staff working time and wages. “We have to reach an agreement this week. If this is in vain, more companies will begin to submit to the necessity of group redundancies,” said Jacek Męcina, an expert from the Polish Confederation of Private Employers (PKPP) Lewiatan and head of the Tripartite Commission handling the labor code.

The Sejm is looking to make savings of zł.37 million, the sum by which its budget has been cut. Most of the this will be saved by the Sejm’s Chancellery, which means that any purchases and repairs will be halted almost immediately. “I hope that savings will not begin to hinder deputies’ work,” said Jerzy Brudnik from PO.

Unable to get bank loans or repay outstanding ones, hospitals are increasingly turning to debt recovery agencies for high-risk loans. The three largest vindication firms, Magellan, MW Trade and Electus, have already lent a total of a few hundred million złoty to hospitals, and this will only increase “as banks loans are becoming more difficult for hospitals to acquire,”. According to Rzeczpospolita, the total debt of hospitals and dispensaries currently stands at zł.10 billion and of this amount 25% is already overdue.


17 thoughts on “Polish recession update

  1. Nice picture. :D

    Did the americans’ new hero Chelsey “Sully” Sullenberger see it?

    When the crisis started there were a lot of funny joke. One of my favourite was this one:

    Banker is saying to himself “This crisis is worse than a divorce! I lost half of money/fortune, but I still have the same wife”!!! :D

  2. I just want to know about the meetup on Feb 7th? Is it still happening? And where? because I’ll need to book a hotel to stay overnight in W-wa.

  3. Good question Anna. I’ll do some marketing and generally check what’s happening and get back to you ASAP. Might well be a blog post about it, in which case I’ll assume you will read it. Thanks for the reminder!

  4. oh crap, when I said ‘dodgy hostel’, I meant it, seriously… last time I just showed up and then phoned around various places once the blog meet started to break up. It was a bit last minute! Hang on I need to give you an email address and I’m trying to work out how to do it without sharing it with everyone else who reads scatts :/

  5. Much of the gloom is media generated. This headline from Wednesday’s Gazeta Wyborcha-cor-wot-a-scorcha really annoyed me:

    “POLACY KUPUJĄ MNIEJ” (“Poles are buying less”).

    December’s consumer spending was 6.6% UP on December 2007. So in fact, Poles are buying MORE.

    BUT, the article continues, consumer spending growth in the first half of 2008 was galloping along at 15% – 20% year on year.


    Economic illiteracy worthy of Gnash Dziennik’s chief leader-writer, and typical of media coverage of this so-called ‘economic crisis’.

  6. I agree much of the gloom is media generated, but some executives are paying attention to it and using it to reduce employment numbers (e.g. PKO Bank 1000 laid off coming imminently). Yet bizarrely one online job site in Poland has doubled its recruitment ad forecast this year and January is at a record high – 37% up on the best month in its history – figure that out Mr Reporter….

  7. I’ve just gone throught GUS’s latest unemployment stats by district (powiat):


    There’s still towns (Warsaw, Płock, Chorzów), where unemployment is falling. Where things were bad (Radom, Ełk, Kłodzko, Grudziądż), things are getting even worse.

    Comparing Oct ’08 to Dec ’08, the number of people registered as unemployed in Poland has increased by 11,600. In the same period, in the UK it has increased by – wait for it – 212,800. THAT’S one hell of a difference.

    (on an unrelated statistical note – car theft in Poland 2008 – 16,500 vehicles stolen, UK 2005 (latest figs) – 199,500 vehicles stolen.

  8. Michael – the figures do not surprise me – what constantly surprises me is the Polish mentality towards believing and frequently quoting that they themselves are ‘inferior’, steal more, work less, blah, blah, blah. If only they could believe in themselves more, and don’t quote history to me, then they would stand tall and rise to greatness in this world. I am not for predicitions but I hope that in 2 generations they will prevail.

  9. Let’s hope it is not just a delayed reaction and Poland has 212,000 jobless increase later this year!

    Car theft is amazing! Both of them. Were there REALLY only 16,500 stolen in Poland? Hmmm. I wonder. Have to admit that it is an awful lot better than when I first got here.

  10. I leave my car open every night – have done since I arrived. I know someone who leaves there keys in every night – I always say she shouldn’t but she does – so far so good. I don’t think twice about what is on display inside my car here but in the Hague I learnt not to leave one euro on the seat despite sophisticated security systems. So I am happy with the low numbee of car thefts – nick mine if you like I’ll get the comp and won’t be disgruntled – fact of life as far as I am concerned being a Geordie…..

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