11 March 2003 Poland: Nominal and real convergence to the EMU Arkadiusz Krześniak tel. +(48 22)
Section 1 External Environment
3 Global recovery expected in 2004 GDP and inflation forecasts of the Deutsche Bank No inflation pressures in 2003.
Section 2 Determinants of Poland’s economic performance
5 Real interest rates in Poland declined but are still high... Real interest rates in Poland, Germany and USA High interest rate differential is the main determinant of the macro- economic situation of Poland (besides relatively lax fiscal policy)
6 Interest rate differential does not impact the USD/PLN much PLN
7 Interest rate differential has some impact on the EUR/PLN PLN
8 PLN to firm on structural factors, reduced uncertainty, successful EU referendum, and interest rate differential PLN
9 East European currencies tend to appreciate in long-term due to productivity gains (Samuelson- Balassa effect)
10 PLN will be additionally firmed by transfers from the EU in the Industrial production and GDP
Section 3 Nominal convergence
12 Interest rate differentials will be declining at a slow pace in PLN
13 Policy interest rate in Poland is coverging to that of euro-zone PLN
14 Inflation in Poland is lower than in Germany! Polish and German inflation
15 And is still falling... Polish and German inflation
16 Why did Polish CPI decline by over 1000 bp in 2 years? Determinants of inflation
1717 Why will it continue to be low? Determinants of inflation
18 PLN yield curve is normalising but still has negative slope Slopes of Polish and German yield curves
19 Real effective exchange rate in Poland is appreciating Real Effective Exchange Rates
20 Full convergence has not yet taken place in Poland. Slopes of Polish and German yield curves
Section 4 Real convergence
22 Business cycles in Poland and Germany are well correlated. Slopes of Polish and German yield curves
23 Labour productivity growth in Poland is higher than in Germany Slopes of Polish and German yield curves
24 But unemployment rate is much higher... Slopes of Polish and German yield curves
25 Unpleasant unemployment arithmetic ( unemployment growth = change in productivity – GDP growth) Slopes of Polish and German yield curves
26 Poland and UE – real convergence (1)
27 Poland and UE – real convergence (2) Personal disposable income (DI) and GDP per capita – nominal and real
28 Maastricht criteria
29 Poland – exchange rate and interest rate forecasts