Poland's current-account deficit is narrowing and, barring sudden shocks, will continue to improve over the next few years, the central bank and finance ministry officials told IntelliNews.
The current-account deficit may narrow to as little as 2% of GDP this year from 2.3% in 2013, a top finance ministry official said. The 2014 figure could also be slightly higher at 2.1%.
The finance ministry has a "high degree of confidence" in this scenario, as Poland's current-account gains are driven primarily by an improving balance of trade, a relatively stable and predictable element of the balance of payments, the official said. The other factor driving the improvement is continued cash transfers from the European Union, the source said.
The comments came just before the Central Statistics Office (GUS) published trade figures for the last year on Tuesday. The data showed trade deficit shrinking to EUR 2.3bn in 2013 from EUR 10.6bn a year earlier. Poland's exports rose 6.5% to an all-time high of EUR 152.78bn, while imports inched up 0.7% to EUR 155.09bn.
Poland may post a trade surplus in 2014 or 2015, according to a member of the Monetary Policy Council (MPC). The member of the central bank's rate-setting committee was speaking shortly after the publication of the trade data for 2013.
One factor that could derail further improvement of Poland's trade balance could be the euro zone slipping into deflation, which would be likely to significantly dent consumption in Poland's largest trading partner. Even then, the negative impact could be partially offset by Western European consumers trading down to buy imports from Poland instead of more prestigious domestic brands.
Another obvious risk to continued improvement of Poland's trade position would be a drastic increase in energy prices, the rate setter said. Although the Polish government is keen on shale-gas exploration to gain energy independence, any significant increase in domestic gas production is far off and does not enter into the central bank's thinking at this point.
Both negative scenarios are possible in 2014 but not likely, the MPC member said. That means that continued trade-balance improvement is the most probable scenario for the next couple of years at least.
Poland will continue to post current-account deficits in the years to come, as the country's level of development relative to its biggest partners necessitates a "largish" capital-account deficit, the rate setter said.
Poland is, however, "almost unique" among so-called emerging markets in being relatively immune to large-scale outflows of "hot money", portfolio investments that can quickly move in and out of a country, which can affect macroeconomic stability. Although portfolio investors can take fright, the guarantee of continued EU funds serves to maintain confidence, while the government and central bank have "generous" means to address the consequences of any panic, should one occur. Poland has "healthy reserves" and access to a Flexible Credit Line from the International Monetary Fund, another stabilising factor.
by Aleksander Nowacki in Warsaw