BMI's Executive Summary

[TOP]

From Q108 we will be calculating the Commercial Banking Business Environment Rating (CBBER) for each of the countries surveyed by BMI. This will permit a more systematic and comprehensive comparison of the conditions within the banking industries of the various countries than was possible in the past. For each country, it will also facilitate a comparison of the conditions within the banking sector and conditions prevailing in other sectors.

Poland's overall CBBER is 64.5. The equivalent figures for the USA and the eurozone are 84.8 and 81.4 respectively. Poland is ranked fourth of the countries in Central and Eastern Europe surveyed by BMI. Within the CBBER, the most important aspect is the banking market structure element of the limits of potential returns. This element accounts for 42% of the overall CBBER. Poland's rating for this element, 68.8, is higher than the overall CBBER and higher than the country structure element of the limits of potential returns, 57.6. Poland has relatively large total assets for the banking sector relative to those other comparable countries in Central and Eastern Europe surveyed by BMI.

Again, relative to the region, Poland scores strongly in its GDP per capita. However, due to slowing growth in consumer demand and private investment, we forecast real GDP growth to come in at 5.5% in 2008 (down from an estimated 6.4% in 2007) and expect this decelerating trend to continue during the rest of the decade. An uptick in investment in the run-up to the Euro 2012 football tournament is likely to put some upside pressure on growth in 2011 and 2012.

Despite a deceleration in the pace of expansion, we remain upbeat about the Polish economy's growth potential and forecast real GDP growth to come in at a respectable 5.5% in 2008 (down from an estimated 6.4% in 2007 and 6.2% in 2006). Our long-held view of a slight, incremental slowdown in economic expansion over the coming two years was confirmed by the most recent data, which showed that real GDP growth was somewhat weaker in Q207, rising by 6.4% year-on-year (y-o-y), down from 7.2% y-o-y in Q107, which took the half-yearly growth rate to 6.8% y-o-y in H107. The fact that the Central Statistical Office of Poland (GUS) revised down Q107 and Q207 figures from 7.4% y-o-y and 6.7% y-oy, respectively, underlined the slowing pace of the economy. In our view, ongoing monetary tightening and a decline in external demand will be the main causes of weaker growth in 2008, a trend that is also expected to remain in place over the course of the following year, thus warranting our growth forecast of 4.5% in 2009.