Franklin Templeton Investments’ Mark Mobius and team recently visited a number of companies in Poland plus they noticed five interesting trends in the Polish economy that gave them room for optimism as investors:
- The rapid growth of the consumer market
- Substantial improvements in infrastructure, with better roads encouraging more car and truck transport
- An increasing emphasis on technology and investment to improve quality
- Tighter bank credit as a result of government policies regarding the banks
- The growing internationalization of Polish business with many companies expanding into the rest of Europe and even beyond
In addition, Mobius noted that Poland has been one of Europe’s fastest-growing economies in recent years as gross domestic product (GDP) growth was 3.6% in 2015 and is expected to rise a similar amount in 2016. However, Brexit means some uncertainty as it has been estimated that Polish workers in the UK send roughly US$1 billion (€0.9 billion) back to Poland each year.
Mobius also went into considerable detail about several issues Poland is facing:
Evidence of Poland’s increasing nationalistic stance can be found in the government’s suspension of privatization efforts involving companies in the banking, insurance and energy sectors considered to be strategically important…
Poland’s new government has proposed measures to bolster government finances by introducing a new tax on bank assets as well as a loan conversion program for Swiss-franc-denominated loans that will force banks to convert these loans into Polish zloty. With more than 500,000 Polish households estimated to be holding such loans, the conversion program, together with the new bank levy, is likely to be costly for the banking industry…
Additionally, Poland unveiled a sweeping pension-reform plan aimed at dismantling the privately owned pension fund system and transferring the bulk of assets to individual retirement accounts, a portion of which will be managed by a state entity…
Recently, the European Commission has expressed concern about some practices in Poland, including what it cited as a lack of respect for the “rule of law” as well as new media laws that give the government authority to appoint and dismiss key television and radio directors at publicly financed media outlets, which could limit freedom of expression…
The political environment has caused some concerns among rating agencies. In January 2016, Standard & Poor’s (S&P) downgraded the country’s debt, and in May of 2016, Moody’s Investors Service shifted Poland’s sovereign rating outlook to Negative from Stable, while keeping the long-term rating at A2. On July 15, Fitch agency affirmed Poland’s credit rating at A-, an unchanged level. In its press release justifying the decision, Fitch Ratings highlighted the solid macro fundamentals of the Polish economy reflected in strong GDP figures.4 The agency forecasts GDP growth at the level of 3.2%-3.3% in the years 2016-2018, which it says should be supported mainly by private consumption…
To read the whole post, Positive Trends and Political Challenges in Poland, go to the Mobius Blog. In addition, check out our list of Poland ADRs and list of Poland ETFs
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