Geert Bekaert and Campbell R. Harvey's
Chronology of Economic, Political and Financial Events in Emerging Markets
Poland
Major Political and Economic Events
Date
860701
Joint ventures between Polish firms and foreign partners were permitted under certain conditions.a3(first entry)
881223
The 1988 Law on Economic Activity with the Participation of Foreign Parties was passed, providing more liberal financial terms than the previous law for foreign partners in joint ventures.a3
890101
A new joint-venture law entered into effect. Joint ventures could have majority foreign participation and a foreign general manager. The statutory income tax rate was established at 40% and the initial tax holiday was extended from 2 years to 3 years. Joint ventures were eligible for income tax reliefs and foreign exchange retention on exports at the rate of 85%. The minimum capital requirement was the equivalent of US$50,000, and joint partners were permitted to transfer abroad their profits up to the difference between exports and imports.a3
891109
An agreement to protect foreign investment was signed between Poland and the Federal Republic of Germany.a3
9100
Banking crises (1990s): in 1991, 7 of 9 treasury owned banks with 90% share of total credit market and Bank for Food Economy and cooperative banking sector were insolvent. Causes: severe economic shock in 1990 and 1991, and poor lending decisions and lack of banking expertise. Overall change in macro policy: (1) governments narrowed public sector deficit in 1992-1994, but it widened again with large SOEs continuing to generate losses and widening external balance; (2) change to crawling peg in exchange rate policy.a2
9100
The introduction of the Insider Trading Laws.a4
910704
A new foreign investment law was adopted, which simplified administrative procedures for the establishment and taxation of new joint ventures, eliminated general tax holidays, and removed all restrictions on transfers of profits and repatriation of capital.a3
9300
Recap. costs for seven commercial banks were US$750 million; recap. costs for Bank for Food Economy and cooperative banking sector amounted to US$900 million. a2 The first prosecution under the Insider Trading Laws.a4
9400
1992-94 government made attempts to bring public sector deficits under control; public sector deficit shrank but widened again with large SOEs continuing to generate losses and widening external balance. It also changed to crawling peg in exchange rate policy. a2
9607
BorisYeltsin's victory in Russian elections.
9608
The privatization ministry indicated willing to sell off Kruszwica. Poland received $2 billion in foreign direct investment during the first half of 1996, comparing to the totaled $2.5 billion in 1995 and $1.3 billion in 1994.
9609
The government agreed to privatize the Polish energy sector. An article in Euromoney declared MR. Konodko was the best Finance Minister in Central Europe.
9610
A cabinet reshuffling. The privatization ministry was abolished. A member of the Polish Peasants' Party-the minority coalition partner-was in charge of the new State Treasury Ministry. National Bank of Poland planned to curb annual inflation in 1997 to 15% and limit the money supply to $10 billion.
9611
Poland continued selling National Investment Fund (NIF) units, which under the mass privatization scheme can be exchanged for shares in NIFs through November 22.
9612
The government planned to privatize Bank Handlowy, the largest commercial bank in Poland.
9701
The lower House of Parliament started discussions on a securities bill that will allow trading in futures and options and align local securities regulations with those in the European Union. The Central Bank lifted bank reserve requirements.
9702
Finance Minister Grzegorz Kolodko resigned and was replaced by presidential economic advisor Marek Belka.
970201
(Controls on capital and money market instruments) The limit for investment in securities issued in Poland by foreign entities and allowed for public trading by the Polish Security and Exchange Commission was raised to ECU 300 million. Residents were allowed to purchase publicly traded securities in OECD countries or in the countries that concluded bilateral agreements on investment protection with Poland. Purchase higher than ECU 50,000 require three months' notice to the NBP. (Controls on credit operations) Residents were allowed to transfer deposits or surety deposits related to tender procedures abroad.a3
970218
ADR effective date. (Company=MOSTOSTAL EXPORT CORP., Exchange=OTC)a11
970318
(Provisions specific to institutional investors) Insurers were permitted to purchase long-term securities traded in OECD countries or in the countries that concluded bilateral agreements on investment protection with Poland rated Aaa-Baa3 by Moody's or AAA-BBB by S&P. In the case of short-term securities, the minimum ratings required are: Prime 1-3 (Moody's) or A1-A3 (S&P). Insurers may invest abroad no more than 5% of the funds covering their insurance fund.a3
9707
Severe flooding in the south of Poland.
9708
The Peasants Party submitted a motion to parliament to remove the prime minister before elections set for September 21. 
9709
The Warsaw Stock Exchange (WSE) tightened requirements for initial listings on the main board. The central bank would open deposit account offering higher interest rates than commercial banks. Solidarity Party won the elections.
9710
Leszek Balcerowicz, a well-known economist and architect was appointed the Deputy Prime Minister and Finance Minister.
9711
Asian markets continued to exert influence on Central and Eastern European markets.
9712
Foreign firms will gain seats on the WSE without registering as Polish companies.
9700
The private sector at least controls a majority of the banking system's asset and equity, as well as about 40% of its deposits.a8
980101
The new Banking Act went into effect, intended to bring Poland's banking regime in line with the EU and international standards with regard to bank regulatory requirements. It created the Commission for Banking Supervision (CBS), responsible for supervising banks and licensing new banks. It also opened up the market to foreign banks operating through branches.a8
980112
The new foreign exchange law differentiates between banks and nonbank entities: banks can conduct some short-term capital transactions, while nonbanks need a special foreign exchange permit. (Controls on derivatives and other instruments) Financial derivatives listed on the Warsaw Stock Exchange may be traded freely. (Provisions specific to commercial banks and other credit institutions) A foreign exchange permit is required for deposit transactions made by nonresidents where the transaction involves deposits exceeding ZI 500,000 maturing in less than three months.a3
9801
The WSE (Warsaw Stock Exchange) initiated trading in its first derivative product, WIG 20 futures.a8
9802
The National Bank intervened to sell about 300 million zloty to prevent the currency from strengthening.
9804
Central bank's Monetary Policy Council decided to lower the money market rate to 23% form 24%.
9806
The IPO of a 15% stake in PEKAO, the country's largest bank.
            9808 Foreign direct investment into Poland doubled to $5 billion in the first half of 1998 compared to the same period last year.
            9811 Polandís parliament passed a bill that will make the zloty convertible for current account transactions. According to the bill, the central bank will retain some controls over short-term capital flows.
         981231 Poland would provide national treatment for financial institutions from OECD member countries.a8
         990112 A new foreign exchange law took effect that differentiates between banks and nonbank entities: banks may conduct some short-term capital transactions while nonbank entities need a special permit. (Controls on derivatives and other instruments) Financial derivative instruments listed on the Warsaw Stock Exchange may be traded freely. (Provisions specific to commercial banks and other credit institutions) A foreign exchange permit is required for deposit transactions made by non-residents where transaction involves deposits exceeding ZI 500,000 maturing in less than three months, and for foreign currency deposit transactions made by residents, except for those related to direct or portfolio investments that require no foreign exchange permits, or for those made from bank accounts maintained by individuals when residing abroad.a3
            9902 The wider-than-expected 1998 current account deficit ($ 6.8 billion vs. forecasts of about $6.3 billion) raised concerns over the outlook for Polandís 1999 balance of payment.
            9903 The Monetary Council lowered the zlotyís monthly rate of devaluation from 0.5 to 0.3% and widened its daily trading limits to 15% above or below the daily central rate.
            9904 Polandís SEC announced plans to tighten regulations governing takeovers and delistings. Shareholders with more than 5% of the voting rights in a company will be obliged to inform the  SEC if they buy an additional 2% of the voting rights.
 
9900
The government successfully sold a 51% stake in PEKAO bank and a 30% stake in Agora, the country's largest publisher.
9907
Bank Handlowy (BH), the leading corporate bank, and BRE bank announced plans to merge to create Poland's largest financial institution, with a combined value of $2.2 billion.
9908
The government decided to subsidize the agriculture sector.
9909
The Polish currency plunged to a record low.
9911
PKN, Poland's largest refiner and fuel distributor, began trading on Nov.26. The government sold a 30% stake in Polish insurer PZU.
200000
The government announced it would set up a special foreign currency account that would service and buy back foreign debt using funds from privatization. Poland's bond market would join the J.P. Morgan Government Bond Index. In the second quarter, foreigners continued to acquire Polish banks, and approximately 70% capital in the banking sectors was under foreign control.
200004
The government opted to fully float the Zloty.
200006
Citigroup was allowed to complete its acquisition of 75% of Bank Handlowy, Poland's top corporate bank. But the remaining two major Poland banks, BG and PKO BP, were removed from the privatization process.
200008
Emil Wasacz resigned as the minister in charge of privatization.
200010
President Aleksander Kwasniewski was reelected. Poland's telecommunications ministry set the price for third-generation mobile phone licenses and officially announced the buyback of US$942 million in Brady Bonds. The parliament defeated the controversial law of "national enfranchisement" that would have given the Poles shares in privatized companies and ownership rights to their homes.
200012
The WSE announced reforms with the launch of the trading system WARSET and plans of a global alliance for business growth. The IMF urged the country to start lowering interest rates.
200103
Poland's Monetary Policy Council (RPP) cut the basic interest rates in response to declining growth rates and inflation.
200104
S&P revised Poland's foreign currency debt outlook to positive from stable. Poland's Ministry of Finance reduced person income taxes and relaxed rigid labor laws.
200106
The RPP cut the interest rates by 150 basis points.
200107
The zloty tumbled 6%, the worst drop for the year. Finance Minister Jaroslaw Bauc was dismissed. S&P downgraded the outlook on Poland's foreign currency debt to stable.
200110
Three leading political parties formed a coalition and took control of 56% of parliamentary seats. The government accepted the coalition's draft budget, including budgeted revenues of 144 billion zlotys and a maximum budget deficit at 5.3% of GDP.
011026 The central bank's Monetary Policy Council (RPP) cut key interest rates by an average 150 basis points yesterday. The cut was the fifth time rates have fallen this year, resulting in a 600bp fall since the beginning of the year. The Finance Ministry's pledges to tighten the fiscal belt were one of the main reasons for the RPP's decision. 'This pledge, supported by today's speech of Prime Minister Leszek Miller, was one of the assumptions on which we based our decision', central bank president Leszek Balcerowicz told reporters. 'We assume that these declarations will be executed ... Reforms are necessary for further economic growth and no monetary policy is able to improve the situation by itself', he added. Falling inflation was a further factor in the decision. Inflation in Poland will probably fall below 5% in 2001, Balcerowicz said, below the 6-8% inflation target set by the RPP for 2001. Reports suggest that, privately, RPP members said no more cuts should be expected before the year-end. They also suggest that RPP members admitted that while a 200-point cut was considered, the RPP decided against it as a result of the government's proposal to introduce a capital gains tax. The Warsaw stock exchange reacted negatively to the news, with investors expecting a 200-point cut. The key index closed 0.2% up on the previous day, after trading 2.7% higher
011129 The National Bank of Poland has cut interest rates for the sixth time this year as inflation in Poland continues its downward spiral. Interest rates have fallen by one-third since January 2001 as inflation in Poland has fallen to new post-Communist lows. However, while the government has applauded the latest reductions, it believes that deeper cuts are required to boost the flagging economy and keep public finances on track
020131 The Monetary Policy Council (RPP) of the National Bank of Poland (NBP) has cut key interest rates by 1.5 percentage points. The cuts are the latest in a series of sizeable rate reductions in Poland, but they are still unlikely to satisfy the government. The central bank's 28-day intervention rate has been cut to 10.0% from 11.5%. Cuts of 2.0 percentage points were applied to the discount rate, which fell to 12.0% from 14.0%, and to the Lombard rate, which fell to 13.5% from 15.5%. In total, key interest rates in Poland have now fallen by some 9.0 percentage points in the last 13 months. Inflation, which has fallen to a post-Communist low of 3.6% in Poland in recent months, was the main factor behind the rate cut, according to NBP governor Leszek Balcerowicz, who chairs the RPP. 'The fall in inflation is evident throughout consumer goods and is not driven only by factors which are potentially temporary', he said. While inflation may have been the main factor, concerns over the countries flagging economy will have also played a part in the decision to cut rates. Government figures released yesterday suggest that GDP grew by a mere 1.1% last year, the smallest rise since the end of Communism in 1989, while unemployment has hit a post-Communist high of 17.4%
020228 The Monetary Policy Council (RPP) of the National Bank of Poland (NBP) has decided to leave interest rates unchanged. It restated its claim that previous rounds of rate cuts had still to feed into the economy and that there were some troubling trends emerging with regard to money supply. However, the over-riding factor appears to have been RPP reservations about the government's budgetary policies. 'Unfavourable changes in the structure of money supply [have] deepened, possibly providing threats to future inflationary processes', the RPP said in a statement. 'Also, high uncertainty regarding public finances has persisted', it added. Finance Minister Marek Belka said that the decision was disappointing and that it would be better if the rates had been lowered. However, he added that a cut in interest rates was likely to come next month. He had earlier stated that sufficient room existed for the council to continue easing monetary policy and that the council should not follow a dogmatic disinflationary path that ignores a Polish economy suffering from sluggish growth and surging unemployment. Prime Minister Leszek Miller was less guarded in his condemnation of the decision. 'In a situation in which the economy is slowing down, unemployment is going up and Polish exporters face more problems related to the exchange rate of the zloty, the RPP decision is disappointing', he said. 'I get the impression that the political portion of the council, independent of what may still happen, will operate based on the principle of "the worse, the better"', he added.
020402 The Sejm, Poland's lower house, has raised the stakes in the current battle of wills between the government and central bank (NBP) by passing a bill demanding that the bank's Monetary Policy Council (RPP) support the government's economic policy. The move follows the RPP's recent decision to once again hold interest rates steady, rather than make the swingeing cuts in interest rates demanded by the government to kick-start the Poland's sluggish economy. The passing of the bill into law would incur the wrath of both the European Commission and the IMF and could jeopardise Poland's European Union (EU) accession. The European Central Bank (ECB) has already warned that government efforts to undermine the independence of their central banks would also make the path towards the EU and the euro more difficult for the accession countries, while the chief of the IMF's recent mission to Poland, Susan Schadler, has warned that placing the independence of the central bank and its rate-setting body, particularly with regard to the setting of interest rates, beyond question is critical to market confidence
020516 Finance Minister Marek Belka took a high-profile swipe at the country's central bank yesterday, stating it had 'frittered away its credibility' through excessive monetary tightness. The remark was the latest in a long-running dispute between the government and the central bank. The government blames current poor economic growth on restrictive monetary conditions; the central bank counters that it is compensating for excessive fiscal deficits. Other reports yesterday appeared to favour the central bank's arguments. Inflation fell to a new post-Communist low in April, at 3% on a year-on-year basis. It was also reported that the government had spent 50% of its planned expenditure over the year by the end of April
020530 The National Bank yesterday moved towards a 50 basis point cut in its benchmark interest rates yesterday. The cut was in response to lower inflation within the country; however, it is already clear that it does not satisfy a government keen to see looser monetary conditions. Month after month brings a new post-Communist low in the increase in the consumer price index (CPI), the latest figures from April indicating annual inflation at around 3%. However, that leaves real commercial interest rates (above the reference rate of the National Bank) around the region of 10%, indicating tight monetary conditions. Those conditions might not come as a surprise, given the record of the head of the National Bank, Leszek Balcerowicz. The Balcerowicz plan of the early 1990s launched Poland on a path of radical economic reform, a nettle not grasped by Hungary or the then Czechoslovakia. Balcerowicz is Central Europe's most noted monetary hawk. The government and the National Bank have long been engaged in a war of words, with the government regarding monetary conditions as being too tight.
020627 During its scheduled monetary policy meeting yesterday, the National Bank cut its reference rate by 50 basis points. The country's reference rate now stands at 8.5%. The move had been widely expected, with inflation currently standing at below 3%. The rate cut provoked a selling of the zloty, which hit a 21-month low against the euro, quoted at one point as trading below the 1 euro:Zl4 level.
020703 The cabinet yesterday increased the cap of the budget deficit for 2003 to Zl43 billion (US$10.6 billion). The agreement within cabinet broke a former promise of Finance Minister Marek Belka to cap the budget deficit for 2003 at Zl40 billion. The estimate of the Zl40 billion figure was roughly -5.5% of GDP, a figure that was not endorsed by the cabinet. The cabinet agreed yesterday on a growth forecast of 3.1% of GDP for 2003. Inflation is estimated at an average 3% over the period. The gap on the current account is envisaged at -5% of GDP
020710 Monetary policy council member of the National Bank, Boguslaw Grabowski, yesterday reiterated the support of the bank for a free-floating currency regime. The appointment of Finance Minister Grzegorz Kolodko has caused the zloty to fall to a two-year low against the euro in recent days. Kolodko has in the past supported the introduction of a currency board, and there are concerns that he may attempt to impose a currency regime. The government and the National Bank have been in a long-standing dispute regarding monetary policy; the government wants to see interest rates brought down, while the National Bank wants the government to cap the fiscal gap. Grabowski described a currency regime as 'absolutely absurd'.
020722 The National Bank, as widely expected, kept its benchmark rate on hold yesterday at 8.5%. The Bank had cut rates for the three consecutive months prior to yesterday's decision. Despite inflation being at record lows, the Bank has expressed its concern at government spending plans under new Finance Minister Grzegorz Kolodko. National Bank President Leszek Balcerowicz stated on Friday (19 July) that it was too early to judge the spending plans of Kolodko
020807 Ratings agency Moody's has stated that it is likely to leave its rating for Poland unchanged in the medium term. The statement follows a recent downgrade of local currency ratings by Standard and Poor's, which had expressed concern at the size of the country's fiscal deficit. Moody's remains confident in its position largely because of the good debt management of the country, which should ensure that debt default remains unlikely despite recent fiscal laxity. A constitutional rule also prohibits external debt from rising to more than 60% of GDP, providing an effective cap on debt; between 2001-02, external debt is expected to rise from 42% to 50% of GDP
020826 The trade deficit contracted by -2.8% from a year ago to US$6.8bn in the first half of 2002, according to data released on Friday (23 August) by the Central Statistical Office (GUS). Exports rose by +4.1% year on year to US$18.5bn, while imports posted more modest growth of +2.2% to total US$25.4bn. Strong growth in trade with Sweden, Russia and the Ukraine was given as the reason for the improved performance in exports. The trade balance with Germany, Poland's largest extraneous market, remained positive until May, before slipping into a slight deficit of US$94.8m in the two months to June
020917 Inflation was reported for August as having hit a new record low as a year-on-year figure. Inflation over the year was down to 1.2%, falling from 1.3% in July. It is generally expected that inflation will pick up later in the year, but that increase has yet to occur. However the National Bank has proved reluctant to ease inflation rates quickly, currently at a headline rate of 8%. The National Bank has repeatedly called on the government to bring spending under control, with the budget deficit this year expected at around -5.5% of GDP.
020926 The National Bank of Poland (NBP) yesterday cut interest rates by 50 basis points. The move sees the reference rate fall to 7.5% from 8% and the rediscount rate fall from 9% to 8.5%. The Monetary Policy Council (RPP) said that the move was the result of low inflation in Poland and concerns that recovery in Poland was failing to gain any real momentum.
021017 Around 7,500 protesters from the Solidarity movement descended on Warsaw yesterday in order to protest at government plans to restructure the steel and coal-mining industries. Predominantly from the industrial Upper Silesia region in south-western Poland, the protestors fear that new European Union (EU) competition rules will force job cuts and redundancies in their respective sectors. The government is currently attempting to privatise the industries and instigate restructuring
021024 Prior to yesterday, the National Bank had made six interest- rate cuts this year, including two 50bp cuts in the last two consecutive months. However, a further cut this month was not expected. The National Bank denied its decision had anything to do with the firming of the zloty over the last week, as international money moved into Central Europe following the 'yes' vote in the Irish referendum on the European Union (EU) Nice Treaty. The zloty has been steadily, if not consistently, appreciating against the euro since its mid-year fall, following the trend for appreciating currencies across Central European EU applicants
021028 The Organisation for Economic Co-operation and Development (OECD) was reported yesterday as saying that Poland has the lowest marginal savings rate amongst the developed Central European economies. The savings rate in Poland was quoted as 4.9% of disposable income. That comes despite Poland having the highest unemployment rate of Central European OECD members. The figure compares to a rate of 12.6% in Hungary. However, during the current slowdown, the level of deposits has increased, leading to a belief that the country is developing a more cautious and long-term attitude to savings. The average rate for the OECD is 8.4%
021128 The authorities eased rates by 25 basis points yesterday. The National Bank's key reference rate now stands at 6.75%. Although recent rate cuts have been welcomed by government and industrialists alike - rates have fallen by a cumulative 475 basis points this year - this latest cut was not sufficient to appease critics of the Bank and its relatively high real interest rates. The government would like monetary easing to help stimulate the beginnings of economic recovery, whilst industrialists have urged the National Bank to bring down rates and take pressure off the appreciating currency. The Bank has consistently stated that it is targeting long-term inflation, and that government borrowing targets are incompatible with eases in monetary policy into the medium term
021209 Finance Minister Grzegorz Kolodko stated yesterday that public indebtedness levels are currently around 50% of GDP, and that in coming years they would stand between 50% and 55% of GDP. The figures will be used by monetary hawks to attack the government for running excessive budget deficits. Poland has constitutional limits that do not allow public debt to exceed 60% of GDP
030102 Legislation that provides the Polish mining industry with state guarantees against bankruptcy expires today, which could finally force the ailing industry into painful restructuring.
030128 The government authorities yesterday reported that they had sold a higher-than-expected 1.25 billion euro (US$1.35bn) in sovereign notes. The notes were to refinance maturing debt, and account for around a third of the government?s estimated financing needs for the current year. The paper was a 10-year denomination, and sold for a yield of 62 basis points above equivalent German treasuries. A number of emerging market sovereigns are taking advantage of the current benign financing conditions, with investors looking for havens from falling equity prices
030227 The National Bank yesterday eased its policy-setting rate by 25 basis points (bp) to 6.25%. The cut was widely expected, and was the latest small step in a long series of interest rate-easing. The interest rate-cutting cycle has now been in place for two years, bringing rates down from when they were hiked up to 19%
030303 Finance Minister Grzegorz Kolodko on Friday (28 February) revealed an expansionary fiscal reform plan by the government
030327 The National Bank yesterday instigated its third interest rate cut of the year, a further 25 basis point cut in its target rate, moving it down from 6.25% to 6%. Both previous cuts, in January and February of this year, were 50 basis point cuts. Despite the monetary easing, the bank has been criticised for holding real interest rates at the highest level in Central Europe. Finance Minister Grzegorz Kolodko restated his oft-quoted position that the National Bank has considerable scope for sharper rate cuts, with inflation well below the 2-4% targeted band of the bank. The bank by contrast has stated that its real concern is for inflation into the longer term, and it has repeatedly cited high budget deficits being run by the national government as a serious medium-term threat to price stability. The bank made no formal statement yesterday on easing the rates.
030605 The finance ministry said that total demand for yesterday's Zl2.8bn (US$733m) two-year treasury bond issue reached Zl8.43bn. The average yield at the auction hit a new record low of 4.741%, with yields on the secondary market pushed down to 4.7% on widespread expectations of a rate cut by the European Central Bank (ECB) later today. The high demand was thought to have resulted from investors seeking the relatively safe haven of short-term papers ahead of a referendum on European Union (EU) membership on 7-8 June. A Polish 'yes' vote is widely anticipated.
030625 Alongside its plans for a reduction in the rate of corporate income tax to just 19%, the Polish government has unveiled plans to tax all forms of capital gains at the uniform rate
030702 Economy and Labour Minister Jerzy Hausner has unveiled plans for an economic freedom act that will significantly reduce the bureaucratic burden on business
030804 In an interview with the Polish daily Parkiet, president of the Polish National Bank, Leszek Balcerowicz, declared that he believes the government's growth estimate of 5% for 2004 is not beyond possibility, although it will be dependent on the government's ability to reform public finances. In essence, the central bank chief implied that he would prefer to see greater budget consolidation, even if it comes at the temporary expense of growth. His statement comes as the battle between the government and the central bank over the status of foreign currency reserves continues. Originally the government had wanted to use the dividend garnered on the foreign exchange reserve from the euro's appreciation against the dollar to finance the deficit, however, the bank has been able to convince the government that it should instead be used for the early repayment of Poland's foreign debt. The bank is known to be concerned that the 2004 budget announced last week plans to increase the level of Polish debt to 55% of GDP
030828 Poland yesterday opted to keep its interest rates on hold on the basis that growth was performing better than expected. The rate currently stands at 5.25%. Undoubtedly the pressure on the bank to relax rates is growing, especially as price inflation is currently contained. However, there is considerable concern at the size of the budget deficit and government proposals to run a similarly sized deficit of around 5.75% of GDP next year.
030905 The zloty fell back sharply against the euro as the authorities reiterated their recalcitrant position over next year's budget and the central bank eased rules on bad loan provisions. The currency fell to month lows of Zl4.4 against the euro as the government announced it would be allowing the budget deficit to breach 5.8% of GDP next year and that pad loan provisions will be eased.
031009 Finance Ministry Officials yesterday hastily put forward a programme of cuts to next years budget, after concerns surfaced over the deteriorating debt dynamic
031010 The Zloty firmed 2.5% yesterday, as Economy Minister Jerzy Hausner sought to soothe investor concerns over Polish budget plans
031106 Standard and Poor's Rating's Services (S&P) yesterday lowered its long-term local currency rating for the Polish sovereign by one notch from A to A- and its short-term local currency sovereign credit and commercial paper ratings to A-2 from A-1. The agency left its long-term foreign currency rating unchanged at BBB+. Contrary to reports in other media, WMRC can confirm that the outlook on both ratings remains unchanged at 'negative'. The agency cited widening fiscal deficit projections and the continued rapid increase in the government's indebtedness as the primary reasons behind the downgrade, with S&P's estimate of the general government deficit on a cash basis put at 8.3% of GDP in 2004, up from 6.1% in 2003, significantly higher than what is being targeted by the government. The reason for the divergence is that transfers to private pension funds are indicated as a financing item but are excluded from central government spending, lowering the official deficit targets by an average 1.5% annually. They also reflect lower growth forecasts and the persistent deficits in extra-budgetary funds. Indeed, S&P's medium-term fiscal scenario sees Poland's membership of the single European currency delayed beyond 2010. The agency's forecasts on debt also make for grim reading, with government debt-to-GDP ratios expected to increase from 40% in 2000, to 55% of GDP in 2004 and to more than 60% of GDP by 2006, while doubt was cast on the ability of the authorities to keep to their recently-announced expenditure-reduction plans in light of the government's sinking popularity and forthcoming elections.
031202 Police have arrested 32 people and charged a further ten who are allegedly part of a scam to siphon off millions of euro of European Union (EU) funds. A nationwide operation uncovered the racket to use pre-accession funds awarded under the Phare scheme to modernise Polish railways and refurnish buildings, work that has been invoiced but never carried out. The main investigation involves the stretch of railway from Rzepin to the Polish capital Warsaw, a strategic route that was slated to benefit from modernisation, which was then overestimated on invoices. Arrests were carried out in western Poznan, southern Katovice, eastern Lublin and northern Gdansk. Company heads and high-ranking officials from Polish State Railways (PKP) are among those arrested.
040107 Leszek Balcerowicz, the governor of the Polish Central Bank, has warned that Polish deputies need to accept the government's austerity plan if the country is to avoid financial market disturbances. Balcerowicz was of course alluding to the recent volatility on the Hungarian currency and bond markets caused, in part, by the government's failure to rein in fiscal deficits. A key difference between the two economies, however, is that Polish external balances have reacted positively to the recent uplift in growth in the country
040123 Unemployment in Poland was reported yesterday as rising to 18% in December 2003, from a figure of 17.6% the previous month. The figure overshadows what have largely been improving economic indicators over recent months. In line with rising exports and industrial output, retail sales were reported yesterday as growing by 17.3% on a year-on-year basis in December. The figure was up on the 11.4% growth over the same period to November.
040205 With fiscal concerns weighing heavily on the zloty's value in recent days, Poland's embattled Labour and Economy Minister Jerzy Hausner pledged yesterday to seek extra budget savings this year as part of his mid-term fiscal reform strategy. The move coincided with the firmest signal yet that the Polish government is targeting entry into the single currency by 2009, while nominal economic convergence, as stipulated in the Maastricht criteria, is scheduled for 2007. Hausner's initial plan to shave Zl15.9bn from the budget over the next four years has not yet been approved by parliament and markets are nervously eyeing constitutional debt limitations.
040218 European Social Democrats looked ever more beleaguered this week as Polish Prime Minister Leszek Miller resigned his party leadership and joined the German Chancellor Gerhard SchrŲder on the party benches
040302 Polish Public Debt Breaches 50% of GDP Mark During 2003
040305 The Polish government passed a key test yesterday by gaining support for the first of the reform-based bills being discussed in the Sejm (parliament), and fought off an opposition proposal to reject three others
040329 After his party split into two, Leszek Miller has announced that he will be standing down as prime minister as soon as the country joins the European Union
040423 A senior official at the National Bank was yesterday quoted as stating that the Polish economy is expanding faster than previously thought. Fourth quarter year-on-year growth in 2003 was 4.7% of GDP, and there are growing expectations that Q1 GDP growth into 2004 could be as high as 6%. Retail sales in March were reported yesterday as increasing by 20.7% on a year-on-year basis. Part of the sharp 21.2% monthly increase came on the back of buying prior to EU entry, but a large part was down to a firming of consumer demand. However, unemployment has yet to respond to firming growth elsewhere, with February unemployment standing at 20.5%, almost flat in comparison with figures from February 2003
040517 The pace of Poland's GDP growth over the first quarter of the year marks yet further acceleration in the pace of recovery from the third and fourth quarters of 2003, although expected upside CPI pressures are now becoming more apparent
040601 A Polish employers' association has published upbeat growth prospects for Poland as an EU member, after a new enterprise freedom law was passed by parliament that is set to liberalise the regulatory environment for business operations. As a result, WMRC has upgraded the country's Legal Risk Rating from 2.0 to 1.75
040617 Poland's current-account deficit was reported as having widened during the month of April to -611m euro (-US$742m). The figure was well up on expectations, and the -428m euro recorded for March. The surge in the deficit follows similar surges in Hungary and the Czech Republic prior to entry into the European Union. The rise has been attributed to pre-accession hoarding by both Polish consumers and businesses.
040701 The Monetary Policy Council of the National Bank of Poland yesterday responded to a strong uptick in inflation with an aggressive 50 basis-point hike in interest rates
040709 Polish Central Bank Governor Leszek Balcerowicz has re-iterated the bank's intention to defend medium-term inflation targets and curb inflationary expectations, lest they translate into 'secondary' price pressures on wages. Balcerowicz stated that the bank needed to quell consumer price expectations less they should manifest themselves as wage demands that would feed into a wage-price spiral. The statement follows last week's 50 basis point interest hike, which was far more aggressive than most had been expecting. Interest rates currently stand at 5.75%, whilst inflation pressures continue to be strong, topping the upper ceiling of the medium-term 1.5-3.5% target range for the consumer price index in May and June.
 
Year
Regulations on Foreign Investors
1995

Restrictions: 1. No restrictions on foreign investment. 2. A permit from the Minister of Privatization is needed to acquire shares in companies in management of seaport & airports; real estate brokerage, purchase and sale transactions. 3. Even if the firm is 100% foreign-owned, it must be registered in Poland. 4. Profits, dividends and capital may be freely repatriated without permits.

Taxation: 20% dividend tax rate (lower if Poland has double taxation treaty with the investor's country) and no tax on capital gains.a5(first entry)

2001

No change through 2001.a5

2004

General update:

A vein of cynicism has existed towards foreign investment, generated in particular by the government's ongoing industrial restructuring. Foreign companies involved in the purchase of companies in these sectors are frequently associated with the restructuring and redundancies that preceded their entry. This sentiment is inflamed by a small but powerful nationalist movement, which also opposes Polish accession to the European Union (EU). These groups lobby for greater protectionism in the belief that foreign investment destroys local industries. Cases in point are heavy industry with its strong steel lobby, and the farmers represented by the Polish Peasant Party (PSL). Although the PSL is the junior coalition party in government, its threat to foreign investment is not significant. More ambivalent towards foreign investment is the right-wing Self-Defence party (SO), led by Andrzej Lepper. Lepper has staged a number of protests directed towards the EU and other western targets. It also protests at EU agricultural protectionism and the unequal distribution of wealth that transition has fostered. Though vocal, these groups are not indicative of Polish society as a whole. Suspicion of foreign companies' motives are more than matched by the government's keenness to promote Poland as a destination for foreign investment.

The Polish Investment Agency has a number of proposals to that end, which include the introduction of a letter of intent to guarantee support for investors, that would begin at the decision-making stage. This would include an undertaking to invest a certain amount on the part of the investor. Developing investment parks and making information such as that on taxation for foreign businesses more readily available is also being worked on.

Poland's legal system protects property rights and investment, allows private business activity in almost every sector of the economy, provides generally equal treatment for domestic and foreign companies, and permits the repatriation abroad of profits and capital. A recently adopted Enterprise Freedom bill has complemented Poland's EU accession with massively simplified procedures for setting up operations, including the introduction of a one-stop shop registration procedure.

e. Suspicion of foreign companies' motives are more than matched by the government's keenness to promote Poland as a destination for foreign investment.

The Polish Investment Agency has a number of proposals to that end, which include the introduction of a letter of intent to guarantee support for investors, that would begin at the decision-making stage. This would include an undertaking to invest a certain amount on the part of the investor. Developing investment parks and making information such as that on taxation for foreign businesses more readily available is also being worked on.

Poland's legal system protects property rights and investment, allows private business activity in almost every sector of the economy, provides generally equal treatment for domestic and foreign companies, and permits the repatriation abroad of profits and capital. A recently adopted Enterprise Freedom bill has complemented Poland's EU accession with massively simplified procedures for setting up operations, including the introduction of a one-stop shop registration procedure.