Poland

SEB MERCHANT BANKI NG – COUNTRY RI SK ANALYSI S February 11, 2009

important your attention is drawn to the statement on the back cover of this report which affects your rights.
Analyst: Jenny Nordgren. Tel: +46 8 763 96 05. E-mail : jenny.nordgren@seb.se

The Polish economy is slowing abruptly and risk following its regional peers into recession. Despite
modest economic imbalances, the exchange rate has come under strong downward pressure,
perhaps reflecting concern about Poland’s sizeable external refinancing need this year.

Country Risk Analysis=
pÜ~êé=ëäçïÇçïå=áå=ÉÅçåçãáÅ=~ÅíáîáíóK=In lle vaIe of lle gIobaI financiaI crisis, lle
IoIisl economy is experiencing a considerabIe sIovdovn in aclivily afler severaI
years of slrong grovll underpinned by privale consumplion and buoyanl
inveslmenls. AccordingIy, GDI
grovll sIoved lo 4.8 ° in 2008 due
lo Iover exporls and inveslmenls
compared lo 6.7 ° in 2007. Going
inlo 2009, a slarp faII in induslriaI
produclion during lle Iasl lvo
monlls of 2008 as veII as vorsening
consumer and business senlimenls
indicale slarpIy sIover domeslic
grovll. As a resuIl, forecasl for GDI
grovll in 2009 lave been revised
dovnvards and some observers even expecl a recession. InfIalion conlinued lo ease
lo 3.3 ° in December afler peaIing al 4.5 ° in 2008 aIIoving lle cenlraI banI lo cul
inleresl rales by 175 basis poinls over lle recenl monlls lo 4.5 °.
Gross Domestic Product
Gross Domestic Product, YoY (lhs) [c.o.p 4 quarters]
Business Surveys, Manufacturing Sector
Consumer Surveys
Source: Reuters EcoWin
02 03 04 05 06 07 08
I
n
d
e
x
-40
-35
-30
-25
-20
-15
-10
-5
0
5
P
e
r
c
e
n
t
3
4
5
6
7
8
9
10
11
12

bñÅÜ~åÖÉ=ê~íÉ=îçä~íáäáíóK=Tle IoIisl zIoly las come under slrong dovnvard
pressure deprecialing around 45 ° againsl lle euro and 70 ° againsl lle US doIIar
since ils peaI in IuIy 2008. Tlis is somevlal more llan ils regionaI peers refIecling
Iarge capilaI oulfIovs from emerging Lurope and possibIy concern aboul IoIand's
refinancing need in currenl difficuIl marIel condilions due lo ils size (more llan
USD 80bn laIen inlo accounl lle currenl accounl deficil, Ioan repaymenls and slorl-
lerm debl in 2009). Tle slarp zIoly deprecialion pul pressure on lle many
louseloIds and corporales llal lave laIen Ioans in foreign currencies (57 ° of
louseloIds' morlgage Ioans). Besides, severaI IoIisl companies face subslanliaI
ledging Iosses afler securing llemseIves againsl zIoly apprecialion a year ago.
According lo lle poIisl IinanciaI Supervision Aullorily llese Iooses are eslimaled
lo USD 1.7bn. In Oclober, lle NalionaI cenlraI banI concIuded foreign exclange
svap agreemenls vill lle Luropean CenlraI banI and lle Sviss nalionaI BanI lo
provide Iiquidily on lle IoIisl inler banI marIel.

SEB Merchant Banking Country Risk Analysis February, 2009

2
táÇÉåáåÖ=ÉÅçåçãáÅ=áãÄ~ä~åÅÉëK=Tle currenl accounl deficil conlinues lo viden and
is expecled lo reacl 6 ° of GDI in 2009 as exporls veaIen fasler llan imporls. Tle
slruclure of capilaI infIovs las delerioraled as IDI infIovs sIoved. Tley nov cover
onIy around 60 ° of lle deficil compared lo more llan 100 ° beginning of 2008
increasing lle need for oller financing. So far llal las been mel mainIy by lle
cenlraI banI draving dovn inlernalionaI reserves vlicl lave dropped significanlIy
lo USD 59bn from ils peaI of USD 85bn in IuIy Iasl year. Tle fiscaI posilion is aIso
coming under pressure from lle economic sIovdovn vill a possibIe videning of
lle budgel deficil from 2.5° of GDI in 2008 lo 3.3 ° of GDI llis year.

bìêç=~Ççéíáçå=éä~åK=In Iasl Oclober, lle governmenl adopled a “road map¨ lo LMU
enlry assuming memberslip in lle exclange rale meclanism LRM-II in lle firsl laIf
of 2009 and euro adoplion in 2012. Hovever, in Ianuary lle finance minisler
indicaled llal lle difficuIl marIel condilions migll deIay LRM-II memberslip, i.e.
lle pegging of lle zIoly lo lle euro vill a fIuclualion margin of +/- 15 °, lo lle
second laIf of 2009. Tle Luro adoplion is aIso claIIenged by Ieeping lle budgel
deficil beIov 3 ° of GDI as slipuIaled by lle Maaslricll crileria. NeverlleIess, lle
governmenl las announced reforms lo lacIIe slrucluraI veaInesses of lle pubIic
finances, incIuding reforms of Iarmer's SociaI Securily Syslem (KRUS), pIans lo
improve lle effecliveness of lle leaIllcare seclor and lle adoplion of an aclive
ageing slralegy lo cope vill demograplic claIIenges, incIuding ageing. Hovever,
lle scope and impIemenlalion of llese reforms are sliII uncerlain, especiaIIy in viev
lle upcoming presidenliaI eIeclions in 2010.
-´-
få=íÜÉ=ï~âÉ=çÑ=íÜÉ=ÖäçÄ~ä=Ñáå~åÅá~ä=ÅêáëáëI=íÜÉ=éçäáëÜ=ÉÅçåçãó=áë=åçï=ëäçïáåÖ=
~Äêìéíäó=~ÑíÉê=~=éÉêáçÇ=çÑ=ëíêçåÖ=ÖêçïíÜK=c~ääáåÖ=áåÇìëíêá~ä=éêçÇìÅíáçå=~åÇ=
éÉëëáãáëíáÅ=ëÉåíáãÉåí=áåÇáÅ~íçêë=éçáåí=íç=ëÜ~êéäó=äçïÉê=dam=ÖêçïíÜ=áå=OMMV=~åÇ=
ëçãÉ=ÉîÉå=ÉñéÉÅí=~=êÉÅÉëëáçåK=qÜÉ=ÅìêêÉåí=~ÅÅçìåí=ÇÉÑáÅáí=áë=ÉñéÉÅíÉÇ=íç=ïáÇÉå=íç=S=B=
çÑ=dam=íÜáë=óÉ~ê=~åÇ=äçïÉê=caf=Ñáå~åÅáåÖ=çÑ=íÜÉ=ÇÉÑáÅáí=áåÅêÉ~ëÉë=íÜÉ=åÉÉÇ=çÑ=
ÉñíÉêå~ä=ÇÉÄí=Ñáå~åÅáåÖK=bîÉå=áÑ=íÜÉ=ëáíì~íáçå=áå=mçä~åÇ=áë=ëíáää=ÄÉííÉê=íÜ~å=ëçãÉ=çÑ=
áíë=êÉÖáçå~ä=éÉÉêëI=íÜáë=ã~ó=ÄÉ=ÅÜ~ääÉåÖáåÖ=áå=îáÉï=çÑ=íáÖÜí=ÖäçÄ~ä=Ñáå~åÅá~ä=
ÅçåÇáíáçåë=~åÇ=áåÅêÉ~ëÉÇ=éÉêÅÉáîÉÇ=ã~êâÉí=êáëâ=çÑ=íÜÉ=êÉÖáçåK=kÉîÉêíÜÉäÉëëI=íÜÉ=
mçäáëÜ=~ìíÜçêáíáÉë=Ü~îÉ=êÉÅÉåíäó=ÇÉåáÉÇ=íÜÉ=åÉÉÇ=Ñçê=Ñáå~åÅá~ä=~ëëáëí~åÅÉ=Ñêçã=íÜÉ=
fjcK=få=íÜÉ=ãÉÇáìãJíÉêãI=íÜÉ=ÖçîÉêåãÉåíÛë=~ååçìåÅÉÇ=êç~Ç=ã~é=íç=Éìêç=~Ççéíáçå=
ã~ó=ÑìåÅíáçå=~ë=~å=~åÅÜçê=Ñçê=ëçìåÇ=ã~ÅêçÉÅçåçãáÅ=éçäáÅáÉë=ÉîÉå=áÑ=íÜÉ=í~êÖÉí=Ç~íÉ=
Ñçê=Éìêç=~Ççéíáçå=áë=äáâÉäó=íç=ÄÉ=éçëíéçåÉÇK==
=
hÉó=ÑáÖìêÉë OMMV
IopuIalion (miIIions) 37896
GDI/capila ($) 9427
GDI (clange) 0.4°
InfIalion 2.8°
Curr.Acc. baIance/GDI -6.4°
Reserves/imporls (monlls) 4
Budgel baIance/GDI -3.2°
Governmenl debl/GDI 49°
Graph: The pentagon shows Turkey's risk worse
than average in all respects including to its
traditional competitor, Brazil, reflecting weaker
liquidity, macro balance and absence of event risk.
bñíÉêå~ä=ê~íáåÖëW=
Iilcl: BB-/pos
Moody's: Ba3
S&I: BB-/pos
dê~éÜW Tle penlagon slovs IoIand's risI profiIe lo
be slronger llan lle average of aII emerging marIel
counlries vlen il comes lo Ionger lerm faclors sucl
as resiIience, absence of evenl risI and informalion.
bñíÉêå~ä=ê~íáåÖëW=
Iilcl: A-, slabIe
Moody's: A2, slabIe
S&I: A-, slabIe
mÉÉêëW
Czecl Rep.
Hungary
Lslonia
-1
1
3
5
7
9
11
13
Resilience
Liquidity
Information
Absence of event
risk
Macro balance
Poland Average EM
Hungary
How to read the chart?
Moving out from the center
reduces risk.
=


SEB Merchant Banking Country Risk Analysis February, 2009

3
Key data: 2004 2005 2006 2007 2008 2009 2010 2011
GDP (bill.US$) 255 304 342 428 529 357 424 504
GDP/capita (US$) 6684 7970 8994 11259 13946 9427 11208 13348
GDP, real (change) 5.3% 3.6% 6.2% 6.7% 4.8% 0.4% 3.0% 5.3%
Investments/GDP 19% 20% 21% 23% 24% 23% 23% 24%
Budget deficit/GDP -5.7% -4.3% -3.8% -2.0% -2.5% -3.2% -3.1% -3.0%
Govt debt/GDP 46% 47% 48% 45% 43% 49% 48% 46%
CPI inflation (%) 3.6% 2.1% 1.1% 2.4% 4.3% 2.8% 2.4% 2.5%
Money demand (%) 4% 12% 12% 13% 12% 0% -4% 1%
Stock prices (%change) 43% 25% 40% 37% -36%
Interest rates 5.8 5.3 4.1 4.5 5.7 3.0 2.9 4.4
Exch. Rate ($) 3.7 3.2 3.1 2.8 2.4 3.6 3.2 2.9
Trade/GDP (%) 66% 77% 95% 121% 146% 113% 138% 157%
Oil price (Brent)$ 38 54 65 73 98 45 59 67
Billions US $
Export of goods 81.8 96.5 117.4 145.3 175.5 131.9 163.2 188.5
Imports of goods 87.5 99.2 124.5 162.4 197.9 157.7 187.8 213.2
Other: 1.8 1.3 1.3 1.2 1.2 1.2 1.0 1.0
Current account -10.0 -3.7 -9.4 -20.1 -27.9 -30.6 -25.4 -24.2
% of GDP -3.9% -1.2% -2.7% -4.7% -5.3% -6.4% -5.5% -4.2%
Net FDI 11.5 7.0 10.7 18.0 12.7 13.6 14.5 15.0
Loan repayments 31.3 30.8 32.2 41.4 47.3 50.0 52.8 55.4
Net other capital flows -32.6 -34.1 -32.3 -39.0 -31.9 -32.8 -41.7 -46.3
Balance of payments 0.3 0.3 0.0 1.3 0.3 0.1 0.1 0.1
Reserves 35.3 40.9 46.4 62.9 59.3 64.0 69.0 73.0
Total debt 96.0 98.3 115.7 159.2 190.1 203.5 215.2 224.8
o/w short term debt 17.8 17.4 20.0 35.6 47.4 50.7 54.5 58.5
Source: OEF (Oxford Economic Forecasting) and SEB estimates
Rating history
Fitch (eoy) BBB+ BBB+ BBB+ A- A-
Moody's (eoy) A2 A2 A2 A2 A3
S&P (eoy) BBB+ BBB+ BBB+ A- A-
Type of government: Coalition of centre-right Civic Platform and centrist Polish Peasant Party
Next elections Presidential elections Oct. 2010.
Other:
Latest PC deal 1991
Recent IMF programs Stand-By agreements in -93 and -94. Extended Fund Facility (EFF) -91
Credit growth
Source: Reuters EcoWin
02 03 04 05 06 07 08
P
e
r
c
e
n
t

(
Y
o
Y
)
-10
-5
0
5
10
15
20
25
30
35
40
45
Households
Corporates
Total
Stockmarket (WIG20)
Source: Reuters EcoWin
02 03 04 05 06 07 08
I
n
d
e
x
1000
1500
2000
2500
3000
3500
4000
Interest rates
Policy Rates, Rediscount Rate
Interbank Rates, WIBOR, 3 Month, Fixing
Source: Reuters EcoWin
03 04 05 06 07 08 09
P
e
r
c
e
n
t
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
Exchange rate
Source: Reuters EcoWin
02 03 04 05 06 07 08 09
2.0
2.5
3.0
3.5
4.0
4.5
5.0
USD/PLN
EUR/PLN




SEB Merchant Banking Country Risk Analysis February, 2009

4
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`çåÑáÇÉåíá~äáíó=kçíáÅÉ=

Tle informalion in llis documenl las been compiIed by SLB Merclanl BanIing, a
division villin SIandinavisIa LnsIiIda BanIen AB (pubI) (“SLB¨).

Opinions conlained in llis reporl represenl lle banI's presenl opinion onIy and are
subjecl lo clange villoul nolice. AII informalion conlained in llis reporl las been
compiIed in good faill from sources beIieved lo be reIiabIe. Hovever, no
represenlalion or varranly, expressed or impIied, is made vill respecl lo lle
compIeleness or accuracy of ils conlenls and lle informalion is nol lo be reIied upon
as aullorilalive. Anyone considering laIing aclions based upon lle conlenl of llis
documenl is urged lo base lis or ler inveslmenl decisions upon sucl invesligalions
as le or sle deems necessary. Tlis documenl is being provided as informalion onIy,
and no specific aclions are being soIiciled as a resuIl of il: lo lle exlenl permilled by
Iav, no IiabiIily vlalsoever is accepled for any direcl or consequenliaI Ioss arising
from use of llis documenl or ils conlenls.

SLB is a pubIic company incorporaled in SlocIloIm, Sveden, vill Iimiled IiabiIily. Il
is a parlicipanl al major Nordic and oller Luropean ReguIaled MarIels and
MuIliIaleraI Trading IaciIilies (as veII as some non-Luropean equivaIenl marIels)
for lrading in financiaI inslrumenls, sucl as marIels operaled by NASDAO OMX,
NYSL Luronexl, Iondon SlocI Lxclange, Deulscle B∏rse, Sviss Lxclanges,
Turquoise and Cli-X. SLB is aullorized and reguIaled by IinansinspeIlionen in
Sveden: il is aullorized and subjecl lo Iimiled reguIalion by lle IinanciaI Services
Aullorily for lle conducl of designaled inveslmenl business in lle UK, and is
subjecl lo lle provisions of reIevanl reguIalors in aII oller jurisdiclions vlere SLB
conducls operalions.

SLB Merclanl BanIing. AII riglls reserved.