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2nd UPDATE: Poland Third-Quarter GDP Rise Beats Expectations

(Rewrites, adding detail and comment.)

By Malgorzata Halaba

   Of DOW JONES NEWSWIRES 
 

WARSAW (Dow Jones)--Poland has not only avoided recession, but its economic growth is accelerating, thanks to strong exports and private consumption.

In addition, fixed investment continues to surprise on the upside, due to large infrastructure projects.

Poland's third-quarter gross domestic product rose at an annual rate of 1.7% in the third quarter, beating forecasts and up from a 1.1% rate in the second quarter, according to a preliminary estimate issued Monday by the Central Statistical Office, or GUS.

The data makes Poland the brightest spot in the region, considering the Czech economy contracted by 4.1% in the third quarter, while the Hungarian economy shrank by 7.2% in the same period.

"The data confirmed the Polish economy is on the recovery path," Bank Zachodni WBK wrote in its research note.

As in previous quarters, net exports remained the key driving force behind the GDP growth, contributing 3.0 percentage points to the growth rate.

"This strong performance was mainly due to the fact that the scale of import decline was sharper than the fall in exports," said Piotr Kalisz, senior economist at Citigroup in Warsaw.

In addition, Poland's private consumption rose by 2.2% on the year in the third quarter, an improvement on the previous quarter. However, that may prove to be a one-off related to zloty weakness in the first half of the year, which prompted Poles to spend holidays in Poland rather than abroad and thus boosted consumption, Kalisz added.

"This phenomenon will likely disappear in the fourth quarter and therefore we expect consumption to slow below 2% in the next quarter," Kalisz said.

Both net exports and individual consumption will be crucial for the growth of Poland's economy in the coming quarters, Erste Bank said in a research note.

"We expect unemployment to peak around mid 2010, which is also when consumer demand should go through its hardest times," Erste said. "With the revival of external demand throughout 2010, the support from net exports should weaken."

The fixed investment fell by 1.5% on the year in the third quarter, compared with a second-quarter fall of 3.0%.

But the downside trend will likely be reversed in the coming quarters, economists said.

"Inventories may add at least one percentage point to annual GDP growth in the fourth quarter due to base effects from last year's massive destocking," Nordea Bank said in a research note.

Among other positives, third-quarter construction output increased by 7.2% year-on-year, up from the second quarter's 4.6% rise.

Statistical Office Web site: www.stat.gov.pl

-By Malgorzata Halaba; Dow Jones Newswires, +4822 447 2430; malgorzata.halaba@dowjones.com

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(END) Dow Jones Newswires

November 30, 2009 06:50 ET (11:50 GMT)


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