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Poland braces for economic slowdown

Polish trade union members block the entrance to the Polish parliament in Warsaw during a protest over the retirment age of workers on May 11, 2012. Poland is bracing for a slowdown in 2013 as exports suffer and austerity measures bite.

Proud of having been the only EU member state to keep growing as the crisis torpedoed economies across the bloc, Poland is bracing for a slowdown in 2013 as exports suffer and austerity measures bite.

The country's official growth forecast for next year is 2.2 percent.

While many in the 27-nation European Union dream of such a performance, for Poland it would mark a fall from this year's expected 2.5 percent and the 4.3 percent posted in 2011.

Analysts are more pessimistic.

"Growth in 2013 is more likely to be 1.4 percent. We can't see any factors that would allow us to forecast anything better," said Konrad Soszynski of the bank BGZ, part of Dutch group Rabobank.

"Budgetary austerity, which means reduced public-sector revenue, plus a pensions freeze and cuts in state investment, have fuelled a fall in domestic consumption which is the main cause of the slowdown," he told AFP.

London-based Capital Economics is gloomier still, forecasting 1.0 percent.

With 38 million people, Poland is the largest economy among the mainly ex-communist entrants which have enlarged the EU from 15 to 27 members since 2004.

Its home market has been a traditional buffer against its trade partners' woes -- it boasted 1.7-percent growth in 2009 as the slump lashed other economies -- but falling domestic consumption is chipping away at that shield.

"Exports can't offset that, because they are still affected by the economic problems in other EU member states, which are Poland's main customers," said Soszynski.

In Warsaw's shopping malls -- a world away from the empty shelves of the communist-era economic meltdown of the 1980s -- the crowds are still bustling as Christmas looms.

But consumers are being careful.

"We've decided to set ourselves a limit this year, and are only giving books in the family and among friends," said shopper Beata, who is in her forties.

In the third quarter, output grew by 1.9 percent on a 12-month basis from 2.5 percent in the second quarter, according to official data.

Compared with the second quarter, meanwhile, the economy expanded by a narrow 0.4 percent in July to September.

"We're still talking about growth, but it's lower than we'd have hoped, and lower than it has been," centrist Prime Minister Donald Tusk acknowledged recently.

In office since 2007, the government led by his Civic Platform movement won a second term in the 2011 general election -- a first for any party since the communist regime's demise in 1989.

The economy was a key issue in last year's campaign, with Tusk proudly flagging up his country's status as a "green island" in a European sea of red.

Underlining the problems now facing the country, Italian auto giant Fiat has announced that in coming months it will cut 1,500 jobs at its plant in Tychy, southern Poland.

That's a third of Fiat's workers in Poland, the bulk of whose production is destined for export.

Even before that blow, unemployment was climbing, hitting 12.9 percent in November after 12.5 percent in October.

Despite sustained economic growth since the introduction of a market economy after the collapse of communism, Poland has struggled with one of Europe's highest jobless rates, albeit now outstripped by those in crisis-hit countries.

But there are concerns that unemployment could continue to rise steadily.

In addition to such macroeconomic factors, experts also fault a shortfall in retraining programmes to help Poland's unemployed change career.

They also blame problems on the housing market which hamper efforts of job seekers to move from hard-hit areas to parts of the country where there is more work, and say the "grey" economy also masks the true picture.

Poland's central bank has moved to stoke the weakening economy by cutting interest rates by 25 basis points this month to 4.25 percent, after having shaved off the same number in November.

It acted after figures showed that 12-month inflation had fallen to 2.8 percent in November from 3.4 percent in October.

Despite eventual eurozone membership being part of the package when Poland joined the EU in 2004, officials in Warsaw have long insisted that while aiming to be ready by 2105, they want the currency bloc to find a lasting solution to its debt crisis before stepping in.

But a senior aide to Tusk's ally President Bronislaw Komorowski recently suggested that Poland could adopt the euro in January 2016.

Poland has been concerned about being shut out of eurozone discussions on deepening European economic and monetary union.

But moving to ditch the Polish zloty could cause political headaches, because the nationalist opposition's backing would be needed to change the constitution, while surveys show just a third of the public support a switch.