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Poland: Nominal and real convergence to the EMU

11 March 200 3. Poland: Nominal and real convergence to the EMU. Arkadiusz Krześniak tel. +(48 22) 579 9105. External Environment . Section 1. Global recovery expected in 2004. GDP and inflation forecasts of the Deutsche Bank. No inflation pressures in 2003 . 3.

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Poland: Nominal and real convergence to the EMU

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  1. 11 March 2003 Poland: Nominal and real convergence to the EMU ArkadiuszKrześniak tel. +(48 22) 579 9105

  2. External Environment Section 1

  3. Global recovery expected in 2004 GDP and inflation forecasts of the Deutsche Bank No inflation pressures in 2003 . 3

  4. Determinants of Poland’s economic performance Section 2

  5. Real interest rates in Poland declined but are still high... Real interest rates in Poland, Germany and USA High interest rate differential is the main determinant of the macro-economic situation of Poland (besides relatively lax fiscal policy) 5

  6. Interest rate differential does not impact the USD/PLN much PLN 6

  7. Interest rate differential has some impact on the EUR/PLN PLN 7

  8. PLN to firm on structural factors, reduced uncertainty, successful EU referendum, and interest rate differential PLN 8

  9. East European currencies tend to appreciate in long-term due to productivity gains (Samuelson-Balassa effect) 9

  10. PLN will be additionally firmed by transfers from the EU in the 2004-2006. Industrial production and GDP 10

  11. Nominal convergence Section 3

  12. Interest rate differentials will be declining at a slow pace in 2003-2004 PLN 12

  13. Policy interest rate in Poland is coverging to that of euro-zone PLN 13

  14. Inflation in Poland is lower than in Germany! Polish and German inflation 14

  15. And is still falling... Polish and German inflation 15

  16. Why did Polish CPI decline by over 1000 bp in 2 years? Determinants of inflation 16

  17. Why will it continue to be low? Determinants of inflation 17

  18. PLN yield curve is normalising but still has negative slope Slopes of Polish and German yield curves 18

  19. Real effective exchange rate in Poland is appreciating Real Effective Exchange Rates 19

  20. Full convergence has not yet taken place in Poland. Slopes of Polish and German yield curves 20

  21. Real convergence Section 4

  22. Business cycles in Poland and Germany are well correlated. Slopes of Polish and German yield curves 22

  23. Labour productivity growth in Poland is higher than in Germany Slopes of Polish and German yield curves 23

  24. But unemployment rate is much higher... Slopes of Polish and German yield curves 24

  25. Unpleasant unemployment arithmetic(unemployment growth = change in productivity – GDP growth) Slopes of Polish and German yield curves 25

  26. Poland and UE – real convergence (1) 26

  27. Poland and UE – real convergence (2) Personal disposable income (DI) and GDP per capita – nominal and real 27

  28. Maastricht criteria 28

  29. Poland – exchange rate and interest rate forecasts 29

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