Poland's economy has to a large extent been decoupled from that of Russia but the financial crisis there this autumn still came as a shock and it has hit the foreign trade figures.
Wieslaw Kolodziej, who has been running a medium-sized business selling processed food to Moscow and St Petersburg, saw his orders from clients there come to a stop overnight. "We just went down to zero deliveries," he says.
That crash hit thousands of other mostly small traders and medium-sized factories which have been supplying the Russian market. It filtered through to the foreign trade figures for September which saw a deficit of $1.5 billion compared to August's $240 million surplus.
September also saw $1 billion leave Polish financial markets as investors abandoned the region in the wake of the Russian crash. But soon after the speculators began to return and the Polish zloty began to appreciate once more. This caused concern that exports would be unable to make up the gap left by the fall of sales to Russia which last year made up 8 per cent of all sales abroad.
In response the Monetary Policy Council (RPP), an independent body, lowered interest rates at the end of October. It also widened the band within which the zloty is allowed to fluctuate.
"It is essential at the moment to keep the flow of speculative capital which is strengthening the zloty at bay," says Stanislaw Gomulka, a key finance ministry adviser. This is because exports must continue to grow and avert the danger of the current account deficit rising above the 3.5 per cent of GDP predicted for this year and 4.3 per cent of GDP expected next year.
Happily, the MPP which is chaired by Hanna Gronkiewicz Waltz, the head of Poland's central bank, was able to lower rates because inflation next year is predicted to fall from this year's 9.5 per cent to 8.1 per cent.
This is the result of Leszek Balcerowicz, the finance minister's tight budgetary policies. His response to the threat posed by the Russian financial crisis is to keep a tight hold on spending and speed privatisation. "We must strengthen Polish enterprises by privatising them" he invariably answers when asked about the crisis.
Russia's problems have also given Mr Balcerowicz powerful arguments inside the cabinet against the spending appetites of the minister from the Solidarity trade union dominated AWS, the government's senior partner.
Mr Balcerowicz is the leader of the pro-business Freedom Union, the minority coalition partner. But he has the backing of Jerzy Buzek, the prime minister, and manages to bring the AWS majority in the cabinet around to his point of view.
Indeed the draft budget for next year bears eloquent testimony to this. It assumes that growth will reach 5.1 per cent (a figure scaled down from 6.1 per cent growth assumed before the crisis) and that the deficit will reach 2.2 per cent of GDP. This compares with the 2.4 per cent of GDP deficit expected this year.
IT IS these figures which allowed the MPP to lower interest rates in an attempt to give exporters some freedom of manoeuvre. But next year's privatisation schedule is as important for Mr Balcerowicz.
First, because it will see the transfer of some of Poland's largest companies into private hands. These include Telekomunikacja Polska SA, the national telecoms operator, whose current initial public offer is seeing between 15 per cent and 25 per cent of the stock being placed with retail and institutional investors. Next year though a strategic investor will be sought for the whole company.
The government will also be looking for a strategic investor for the Pekao SA, one of Poland's largest banks with Allied Irish Banks in the bidding alongside Citibank and Deutsche Bank.
Next year will also see a public offer for the Petrochemia Plock, Poland's largest refinery, which is set to become a private sector national Polish company. In the steel industry the two main mills are to be privatised. Talks are continuing with British Steel and Voest Alpine of Austria who are set to become investors in Huta Katowice and Huta Sedzimira respectively.
The proceeds from these sales are to reach zloty 15 billion ($4.5 billion). Over one-quarter of this sum is to be spent on funding Poland's pension reform which comes in on April 1st. This will see one-fifth of the pension payments which employers now make to a pay-as-you-go system put into private funds managed by private sector consortia. The plan covers all those under 30 and those under 50 who chose to join. The remainder will stay under the old system.
The reform is modelled on pension schemes pioneered in Chile and in force mainly in Latin America. It will increase the low rate of savings in the economy and bolster Poland's stock market which has taken a knock from the price falls of the past months. It is also a first step in cutting Poland's relatively high social security costs.
