Poland’s growth was the envy of Europe, right?
Analysts pointed to its steady advancement, strong domestic demand, ongoing wage growth and only one ‘small’ wobble during the crisis connected to foreign currency exposure, now largely sorted due to IMF funds. A ha.
In fact, Barclays Capital was so bullish about Poland they put a note telling all to buy the zloty just a few weeks ago. A ha.
But things might not be so rosy after all.
Last week saw a failed 5-year bond auction in the country, a shock current account deficit registered for July and a sharp sell-off in the zloty and Polish Treasuries.
BNP Paribas, meanwhile, advised investors should go on selling Polish government bonds because of a “very dangerous” fiscal outlook for the country. S&P drew attention to the country’s young credit profile and the fact that foreign currency lending — the region’s bête noire — was actually rising.
On Monday, Danske Bank even suggested the bad news might stop with last week (our emphasis):
On Friday negative news flow from Poland continued when the current account for July was published. They show the current account situation worsened to a deficit of EUR565m, much worse than the current account surplus of EUR459m in June and worse than the consensus expectation of a surplus of EUR215m. The deterioration in the current account was driven by both weaker than expected exports and stronger than anticipated import growth.
The coming week will be dominated by Polish data. Although fundamentally we do expect Polish markets to underperform their regional peers the “unwinding” of long positions in Polish markets is likely to persist if negative news flow continues.
Indeed, as if by magic, the zloty fell as much as 2 per cent against the euro on Monday morning:
WARSAW, Sept 14 (Reuters) – The Polish zloty lost more than 2 percent from its Friday close and traded at 4.2444 against the euro at 0634 GMT on Monday, its lowest in more than seven weeks, the Reuters system showed.
Related links:
Foreign-currency lending is rising in Poland – FT Alphaville
Poland: not so strong after all? – FT Alphaville
The big Le-borrow-ski – FT Alphaville