News / Europe

Polish Consumers Finally Cowed by Europe's Tale of Woe

FILE - One of the latest additions to Poland’s growing luxury goods market, the Wolf Bracka department store, in Warsaw, May 31, 2012.
FILE - One of the latest additions to Poland’s growing luxury goods market, the Wolf Bracka department store, in Warsaw, May 31, 2012.
Reuters
Polish households' hearty appetite for new cars, televisions and washing machines has helped pull the economy out of previous slumps, but in this downturn consumers are leaving their wallets at home.

Data on private consumption and consumer sentiment is so weak, in some cases the weakest since the end of Communist rule, that official forecasts that the economy will pick-up in the second half of this year are looking optimistic.

Most European economies have seen private consumption fall since the 2008 financial crisis, but the EU's largest eastern economy stands out for several reasons.

The slowdown has arrived much later than in the rest of the continent, held off largely by demand from consumers whose living standards had been rising quickly since joining the EU in 2004.

The drop-off in consumption is severe and feels more painful for a country which needs to grow faster - and generally has done until recently - to reduce what remains a substantial wealth gap to its western peers.

Preliminary data shows that private consumption may have contracted in the fourth quarter of last year for the first time since the fall of the Berlin Wall in 1989.

According to business lobby group Lewiatan, real wages fell 0.1 percent in 2012, the first time since 1993.

Even the central bank, which has long held the view that the downturn would be short-lived, acknowledges the problem.

"There is this grey cloud floating from the West, slowly overshadowing the Polish economy," said Marek Belka, the central bank governor. "And it is telling the Polish consumer ... be careful, go hide in some hole."

Tipping Point

In December, traditionally a strong month for store owners because of pre-Christmas shopping, retail sales took their deepest dive in almost eight years, dragged down by falling sales of cars and books.

Consumer sentiment in January stood at 76 points, a touch above the previous month's reading that was near a 20-year low.

"The Polish consumer now seems to be scared out of his mind," says Danske Bank's Lars Christensen, one of the most experienced commercial bank economists watching eastern Europe.

He and others say that Poles have finally lost their faith, ingrained by more than two decades of almost uninterrupted growth, that the economy will keep expanding.

Political debate in the country of 38 million has been dominated over the past year by warnings of a deepening downturn, filling domestic media with grim tidings. Unemployment is back on the rise.

"Poles have been bombarded with bad news for five years now and this is now taking its toll," said Halina Kochalska from mortgage brokers and financial advisors' Open Finance. "It's like a self-fulfilling prophecy. People are worried about what's ahead and articles on the front pages of newspapers about mass layoffs at factories, like Fiat, or possible bankruptcy of big companies like the airlines LOT don't help."

There is also evidence that a boom in consumer credit seems to have reached a natural stopping point.

After expanding for most of the last 15 years, the overall stock of consumer credit - never mind that of new loans - has started falling; in all of 2012, Poles paid back a net 6.9 billion zlotys ($2.24 billion) in loans, leaving 132.1 billion outstanding.

As many as 66 percent of Poles now say they have at least one car in their household. About 86 percent have a mobile phone, over 90 percent own a washing machine, and half say they have a digital camera.

"A critical point seems to have been reached," says Kochalska. "Demand for credit is falling and this year will be very difficult as well with no improvement in sight."

Born Poor

Less than two decades after a transition from communism, which left a fifth of the workforce unemployed, even younger Poles are still more experienced than their Western European peers at living for little.

Poles live in smaller apartments - 47.5 percent are overcrowded compared to the EU average - and drive cars that are on average almost twice as old.

After falling for the best part of a decade, unemployment rose to a six-year high of 14.2 percent in January and many are tightening the purse strings in response.

Magda, a 36-year-old writer in Warsaw, said it was the first time in her memory that friends from her middle-class circle had lost their jobs and struggled to find new ones.

"I am three months pregnant now and I frankly hope it's another girl," she said. "We wouldn't have to buy anything new if it was another girl, we have everything for a girl already."

Officials maintain a recovery is round the corner. The government forecasts GDP growth of 2.2 percent this year, against last year's 2.0 percent. It bases this on expectations for improvements in the eurozone, which could filter through to Poland's economy.

But Poland's dependence on its domestic consumers, the very thing which helped insulate the country from the slowdown up to now, now means any improvement outside the country will be slow to reach the Polish economy.

In southern neighbor, the Czech Republic, exports account for about 80 percent of gross domestic product (GDP). The Polish figure is half that.

"I think the recovery will disappoint," said one London-based hedge-fund strategist. "It is the Polish consumers that have troubled me. They just can't drive another recovery."

You May Like

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries More

China to Open Stock Markets to Pension Funds

In unprecedented move, government to soon allow local pension funds to invest up to $94 billion in domestic shares More

1 Billion People Used Facebook on Single Day

Facebook CEO Mark Zuckerberg praised the accomplishment in a posting on the social media site More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs