LONDON (Reuters) - Poland will dodge the recession weighing on swathes of Europe, the country’s finance minister said, noting there was plenty of scope for the Polish central bank to cut interest rates further to support growth.
“We don’t see the slowdown as being particularly threatening,” Jacek Rostowski told Reuters Television on Friday.
Asked if there was a danger of recession, as many economists have suggested, Rostowski said:
“No. Poland’s economy has slowed as a result of what was happening in the euro zone, as a result of three years of recession but since the declaration by the European Central Bank to ‘do what it takes’, we expect stabilisation in the euro zone, and stabilisation in euro zone means recovery in Poland.”
“We expect recovery in the euro zone in 2014 which means acceleration in Poland,” Rostowski added.
Poland was the only European Union member to escape recession after the 2008 financial crash but its economy has been slowing since last year and looks unlikely to rebound quickly, dragged down by unemployment at a six-year high and a sharp drop in consumer spending.
Rostowski said however the government was not changing its 2013 growth forecast - predicted at 2.2 percent in the budget. Economists polled by Reuters are less optimistic, predicting growth this year will be 1.5 percent, the lowest in 11 years, after a 2 percent expansion in 2012.
Poland’s government has placed some of the blame for the economic weakness on the central bank, which it says was too late to kick off monetary easing last year and also that the rate cuts have not been fast or deep enough.
The central bank has cut interest rates by 100 basis points since November and has indicated it will not pause the cycle in March as was previously suggested.
Rostowski noted that Polish inflation in January was 1.7 percent while interest rates were 3.75 percent. The fiscal deficit on the other hand had contracted almost 6 percent in the past three years, he added.
“The real interest rate in Poland is 2 percent, that is far and away the highest real interest rate in Europe,” he said. “We think there is a lot of scope for reduction in interest rates.”
Rostowski also said a growth pickup would be boosted by a government plan to guarantee up to 60 billion zlotys in working capital credit to small businesses, along with an investment programme for infrastructure projects and EU cohesion funds.
Poland, which joined the EU in 2004, is obliged to adopt the euro at some point in the future. Accession by Poland would be a strong vote of confidence in the battered currency union.
In December Prime Minister Donald Tusk raised the prospect of relaunching the bid for adoption soon and said a decision should be made in the coming months. But support for the euro is low among Poland’s population while the central bank also says the drive for an early entry to the euro poses needless risks.
Rostowski declined to say what would be an appropriate time for accession to the single currency.
“It’s not a matter of setting dates, it’s a matter of setting out what we have to do and what the euro zone has to do in order for us to join the euro zone safely,” he said.
“We are in the process of having a debate on what we need to do to make it safe for us to join the euro. After the crisis countries have to be much better prepared before they join... once we set that out then we will be able to think of a date when we might be ready.”
Reporting by Sujata Rao; editing by Ron Askew