Curious, one of the scarce EU economic success stories of late, very little attention, I'll gather some info here.
Of the 10 mostly post-communist countries that joined the European Union exactly a decade ago today, none has benefited more from membership than Poland. First and foremost, there's the cash: the country received £56bn in development funds between 2007 and 2013, money that was used to build hundreds of kilometres of highways and express roads as well as youth sports facilities, modern sewerage systems, kindergartens and pre-schools. Add to that the £60bn earmarked for Warsaw in the EU's 2014-20 budget and the country will have enjoyed a windfall equivalent to roughly double the value of the Marshall Plan, calculated in today's dollar figures. And that does not take into account the tens of billions of pounds that Polish farmers continue to receive in agricultural subsidies from Brussels. What we are witnessing is, without doubt, one of the largest wealth transfers between nations in modern history.
The Polish stock exchange, the WIG30 is the main index, hasn't been a top performer though (see graph below). Here is the official portal, and here is the composition of the WIG30
An interesting question is how the Ukraine crisis has, and can affect the Polish economy, as they have been quite vocal in their support of the Maidan revolution. Opinions differ.
“EVERYTHING depends on what happens in the east,” said Janusz Piechocinski, Poland’s economy minister, in a recent interview on Polish radio. Around one-fifth of Poland’s exports go to neighbouring Ukraine and Russia, thousands of jobs depend on trade with the east and Poland still gets a lot of its oil and some of its gas from Russia. No wonder then that, with an explosive stand-off between Russia and Ukraine, Mr Piechocinski is no longer certain that Poland’s GDP will increase by up to 3.2% and its exports by 6% this year, as he forecast only a few weeks ago.
Poland exports a diverse assortment of goods to Ukraine - including everything from apparel to home appliances and automotive parts. Although statistics from Poland's Economy Ministry indicated a decline in Polish exports to Ukraine for the first two months of 2014, Ukraine is still Poland's eighth-largest export market and goods sent there make up 1 percent of Polish GDP. "Even in the worst-case scenario," Adamiak said, "it's highly unlikely that problems in Ukraine will cost Poland's economy more than 0.5 percent of GDP." That "worst-case scenario" involves Ukraine defaulting on its debts, which is less likely as initial loan guarantees and other offers of aid have been made by the United States and European Union. Specific Polish companies, however, are likely feeling the pinch: The LPP apparel company sells 4 percent of its goods to Ukraine customers. Sniezka, a Polish paint manufacturer, considers the country its most important market. Rovese, which makes ceramics and bathroom furniture, has facilities in both Ukraine in Russia. "This is probably the single most exposed company, because it has one-third of sales in Russia and Ukraine and also has significant facilities there," Adamiak said.
It's Russia, however, where the pinch could turn to pain. In that case, it wouldn't be exports lost to a country in default but rather a single and very vital Russian import. "The Polish economy is highly dependent on hydrocarbons from Russia," Adiamak said. That is where Poland's outspoken support of Maidan protestors in Kyiv and its disapproval of hostile takeovers by Russian-speaking troops of government facilities in Crimea could ultimately prove harmful. "Poland has been quite active in this conflict - it's a leader in supporting Ukraine - so if Russia were to impose sanctions, it would choose those countries that are most active on the European side," Adiamak said. Eight percent of Poland's gas, the strategist added, is imported from Russia; when it comes to oil, the number is higher.
Russia takes in 6 percent of Poland's exported goods, together accounting for 2.5 percent of the Polish GDP. One-sixth of those goods are agricultural and are, according to Adamiak, "vulnerable." "It's socially sensitive, politically sensitive, and actually, it's an easy target," he said, adding that food safety pretenses could be used to justify an end to agriculture imports. But even in the worst-case scenario, Poland would still manage, he said, and far it would do so better than dramatic television reports and strong political language might lead many to believe.
The shares are trading on cheap multiples. While this is from July 2013:
And finally there is Poland. Currently we are reading a lot about reshoring, about how rising transport costs and the growing need for companies to be more flexible in the manufacturing sector, is leading companies to bring their manufacturing closer to home. This trend is partly manifesting itself in companies reshoring manufacturing to countries where they achieve most of their sales. But there is a growing view that countries on the edge of high spending regions, with low labour costs and high productivity may benefit. In this respect two names keep cropping up – Mexico, where unfortunately PE ratios are above the historic average, and Poland.
Anyway, here are the PE ratios for the countries I mentioned back at the end of June.
