‘Polish central bank policymakers on Monday offered differing views on the scale of the economic slowdown in 2009, underscoring uncertainty about the impact of the global financial crisis on the EU’s largest eastern member.
Andrzej Slawinski, a moderate on the 10-member rate-setting Monetary Policy Council (MPC), said he expects growth of around 2 percent this year, while his hawkish colleague Marian Noga told a newspaper economic growth would slow to 3 percent.
However, both figures mark a significant slowdown from a predicted growth rate for 2008 of at least 5 percent, with markets expecting the central bank to respond by cutting interest rates by a total of one percentage point during 2009.
Analysts have in recent months slashed forecasts for the local economy as worries mount that recession in the euro zone, Poland’s main trade partner, will derail years of strong growth.
The deteriorating outlook for the economy also prompted the central bank to slash borrowing costs by a total of 1 percentage point late last year, including a 75 basis point cut in December, its biggest easing in six years.
The main interest rate in Poland now stands at 5 percent.
‘The divergence of forecasts is high … but growth of close to 2 percent is the most likely scenario,’ Slawinski, a key swing voter on the MPC, told radio PiN in an interview.
The Polish government expects the economy to expand at 3.7 percent in 2009, but analysts are less optimistic and predict growth to slow to 2.8 percent from 5.0 percent expected in 2008.
Slawinski said the recession in the European Union will likely be protracted but shallow and that the easing cycle the Polish central bank launched in November was aimed at bringing growth back to its potential.
In a newspaper interview published on Monday, Noga — who consistently backed raising borrowing costs in the previous tightening campaign — said the bank may cut interest rates in steps of 50 basis points each during the current easing cycle.
Asked whether incoming data could back another sharp cut in borrowing costs, Noga told daily Rzeczpospolita: ‘In the current situation the most appropriate would be steps (interest rate cuts) of 0.5 percent.’
But he cautioned that a weak zloty, inflation remaining above the central bank’s 2.5 percent target and still relatively good economic growth all argued against deeper cuts.
‘Inflation may fall relatively soon below the upper level of the bank’s target range, meaning below 3.5 percent, but then inflation may rise,’ Noga said.
‘We will not reach the target of 2.5 percent this year. It may happen at the beginning of 2010 at the earliest.’
Last Friday, the Polish Finance Ministry said annual consumer price growth likely slowed to 3.4 percent in December, falling to within the central bank’s target range for the first time since October 2007.
Noga said last Friday the MPC could cut rates again in January and possibly in February and March too.
Poland’s statistics office is scheduled to release official December inflation figures on Jan. 14.