OECD Sees "Bright Prospects" For Poland's Economic Growth

ByBridgeNews Beyond the immediate economic slowdown, prospects for Poland's economic growth in the medium term are bright, said the Organization for Economic Cooperation and Development in its survey of Poland published Apr.10. The OECD said, however, that achieving the government target on a 4.5% GDP growth this year would require a significant pick-up of activity. Commenting on the country's monetary policy, the OECD said a relaxation of the monetary policy "would be appropriate" should the risk of prolonged economic weakness become significant. Poland's high interest rates -- now standing at 17%-21% or some 10-14 percentage points above inflation -- are considered to be the main reasons for slower economic growth, which stood at 2.4% on the year in the fourth quarter of 2000 compared with 6% in the first quarter. The OECD said the last two rate cuts since the beginning of the year were justified by the emergence of several disinflationary factors, namely weak domestic demand, sharply increased unemployment, slow growth of unit labor costs, falling oil prices, and the strong zloty. "Any further [monetary] relaxation, should it become necessary, has to be cautious in order not to jeopardize the medium-term inflation goal of less than 4%, which the Monetary Policy Council intends to achieve by 2003," the survey said. It also said that inflationary pressures were likely to keep some strength in years ahead "because the convergence toward higher income levels will push wages up in the non-tradable sector." The OECD said a sound fiscal policy was necessary, and added that the Polish government "should concentrate on getting the budget back on a medium-term path of consolidation and aim at a general government budget surplus by 2003."