1. Michał Górzy ń ski CASE – Centre for Social and Economic Research/ CASE-Doradcy Zagreb, 26/04/2009 The impact of the global financial crisis on the industrial sectors of Poland. Main aggravating factors of the crisis and possible solutions

2. Structure of the presentation Economic overview of the Polish economy Economic standing of the industry sector in Poland Specific of the Polish case The situation and the problems of the banking sector Measures taken by the government Possible solutions

3. Polish GDP Polish economic situation is relatively good comparing other European countries, but the economic forecasts are more and more pessimistic what results from the worse than expected economic condition of the world economy GDP growth in 2008 + 4,8%; Contribution to GDP: consumption - +3,3, investments – +1,7, public investments – 0,1, foreign trade -0,1

4. Polish GDP 2009 Mid of 2008 – forecasts for 2009: +4,5% November – forecasts of MoF for 2009 (budgetary act): +3,7% January 2009 – revision of MoFs forecasts for 2009: +1,7% GDP growth in the first quarter 2009: + 0,3-0,4% Present forecasts from -0,7 (IMF) to + 1,5% (CASE)

5. % growth of VA according to the sectors (y-o-y) ConstructionMarket services Non-market services IndustryAgriculture 200811,35,61,23,2 IV Q 20084,85,13,20,93,6

6. Unemployment rate in %

7. Average employment in enterprise sector (y-o-y)

8. Dues (y-o-y)

9. Industrial new orders (y-o-y) - in %

10. Sold production (seasonally adjusted) - y-o-y

11. Successful branches Sold production (y-o-y) XII/2008-II/2009

12. Most crisis infected branches Sold production (y-o-y) XII/2008-II/2009

13. Nature of the Polish crisis… Non – economic crisis Non- banking crisis Rather…. Foreign exchange rate crisis, which may be followed by economic and banking crisis

14. Problems of banks Polish banking sector, comparing to other countries is in a relatively good condition: no toxic assets in the portfolio; Polish households repays regularly mortgage credits but… Many bank have foreign exchange mortgage credits in the portfolio and depreciation of PLN as well as an increasing unemployment may be a problem… Banking sector liquidity problem resulting from the lack of trust – recently the situation improved a bit… Limitation of credit activity of the banking sector resulting from the capital adequacy ratio…. Nationally based banks vs. foreign owned banks

15. Financial results of the banking sector in Poland

16. Exchange rate 07/2008-03/2009

17. as a result of the foreign exchange crisis… Significant financial losses of the enterprise sector resulting from the derivative instruments – 20 billion PLN (the cause of the speculative attack on the PLN) In a long term possible deterioration of the banking sectors economic standing A few hundreds thousand households having mortgage credits in EUR or CHF (as a result decrease of the domestic consumption) Deterioration of the economic standing of Polish importers

18. But on the other hand… Significant increase of the Polish exports competitiveness (despite the decrease of the export) Shift of the domestic demand towards domestic products (significant decrease of import) – reorientation of the Polish industry Increasing competitiveness of the Polish economy for foreign investors (economic crisis in the Easter European countries, depreciation of PLN to Euro and USD, relatively huge internal demand)

19. Taken measures Budgetary savings – the goal is to keep the budget deficit and to meet EURO criterias- the Polish approach Easing the monetary policy – e.g. decrease of the interest rate by the National Bank of Poland PR activities - to present the real economic situation of the Polish economy (especially to financial investors form the largest fianncial institutions) A declaration of the government to join ERM and to adopt Euro Special IMF Flexible Credit Line - 21 billion USD (just in case)

20. Solutions/recommendation To join Euro zone as soon as possible Try to increase the credit aviability to the companies – e.g. special govermnents credit lines to SMEs More effective usage of the structural funding To keep the fiscal discipline – no money on the market to finance the budgetary deficit More restrictive monetary policy (the problem of inflation may arise) Issue of supervising the banking sector in the global dimension Improving the regualtions concerning the banking sectors information policy about the derivatve products To cross fingers for the world economy (first of all USA and Germans economies…. ) …..

21. Thank you for your attention Michal.Gorzynski@case.com.pl