By Carl Delfeld of Chartwell ETF and ETFfolio
Of the central European emerging markets, the Lex column at the Financial Times believes that Poland is best placed to weather the western slowdown. Poland represents a bigger domestic market, and larger share of exports going to still fast-growing Russia and Ukraine. Furthermore, only about 20% of its GDP comes from exports to the eurozone, against about 40% for the Czech Republic, Hungary and Slovakia.
The governing coalition, while far from perfect, looks relatively stable in a region known for political turmoil.
Economic growth is slowing from 6.6% last year, to a forecast 5.3% this year. Industrial output growth is also off sharply and a tighter monetary policy is being used as a tool to rein in inflation which is just under 5%, nearly double the 2.5% target. The current account deficit is also moving up but is in better shape than neighbor countries.
But Capital Economics forecasts a bounceback towards 5% annual GDP growth by 2011-2012 boosted by higher labor productivity. Poland's market has not been spared from the emerging market sell-off. The Warsaw market is down a third from its all-time peak last October. Trading at 9.5 times forward earnings, compared with a five-year average of 16 times.
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