The Polish Central Statistical Office (GUS) last week advised that during the period of January to July 2020, Poland recorded a foreign trade surplus of €5.6b EUR. For the same period in 2019, Poland recorded a trade deficit of minus €0.2b EUR.
Whilst a surplus is always welcome news, it does come a result of significantly reduced trade – with exports of €129.6b being down 6% for the same period in 2019, and imports down 10% to €124.0b.
There is variation in the calculation of Poland’s trade balance which, depending on the reporting currency, can show different % values for import and export movements.
In the local Polish currency, the % decline in import / export values is less pronounced than the Euro based calculation with exports showing a decrease of 3.9% and imports decreasing by 8.1%.
When expressed in USD, the reduction in overall trade value shows a decrease in exports of 8.4% and a decrease in imports of 12.3%.
The WNP.pl portal reported that Poland’s largest chain of small format convenience stores called ‘Żabka’ – which means ‘Frog’ in English – is using machine learning and AI to determine what inventory to stock at each of its locations (“hyper-personalization”).
WNP.pl quoted Tomasz Blicharski, VP of Finance & Development at Żabka Polska, as saying that machine learning plays a crucial role in determining which locations to open new outlets of the convenience store. The Żabka network already comprises 6,443 stores with 4,800 franchisees however it continues to add outlets to its portfolio.
We were not provided with many details on the exact AI & machine learning methodology but it’s clear there is a digital transformation underway at Żabka as they recently launched a home delivery service using Uber Eats and are pushing a consumer focused loyalty and discounts app.
According to ISB News, one of Poland’s largest supermarket stores, Biedronka sold 830m PLN (€186m EUR) of Polish products during its first week of a campaign loosely translated to ‘Buy Polish’.
The largest single day of trading registered 150m PLN (€33.66m) of sales for ‘Polish’ products either belonging to Polish brands, or items produced, processed, or packaged in Poland. There is a certain irony Biedronka’s campaign given the chain of no-frills supermarket is owned by the Portuguese group Jeronimo Martins (JM).
At the end of June 2020, Biedronka operated over 3,030 outlets across Poland. In its 2019 annual report JM showed annual revenues for Biedronka reaching €12.6b with EBITDA of €0.92b.
For comparison, Coles supermarkets in Australia operated 821 outlets, achieved €19.06b revenues, and generated an EBIT of €0.73b in 2019.
On Thursday 27th August, the Polish Ministry of Finance presented a draft budget for 2021 that resulted in a predicted deficit of €18.6b EUR, with Polish government debt climbing to 64.7% of GDP in 2021.
The draft budget called for increased spending on:
• Defence – rising from 2.1% to 2.2% of GDP in 2021 (rising to 2.5% by 2030)
• Health care – up from ~5% to 5.3% of GDP (rising to of 6% by 2024)
• Pension indexation – increasing by 3.84%
• A specific child benefit payment program (“500+”) – amounting to €9.3b
Thursday’s announcement follows on from news last week that the once balanced budget of 2020 would be significantly adjusted to reflect a decline in GDP of -4.6%, resulting in a €24.8b deficit.
The combined €43.4b deficit for 2020 and 2021 is a significant hit to Polish finances however with GDP growth in 2021 predicted to be above 4% and inflation rising somewhere between 1.8% and 2.3%, market confidence remains high.
For reference Poland’s GDP in 2019 reached around €520b – depending on the method of currency conversion.
On Tuesday, 25th August, Santander Bank Polska released a snapshot analysis of Poland’s annual food production from 2010 to 2018/19. The analysis showed:
Food production values in in 2018 reached €57b EUR – 57% higher than 2010 (€35b)
A surplus of food exports / imports of €10.5b – 400% higher than 2010 (€2.6b)
Total export values jumped 135% from €12.6b in 2010 to €29.6b in 2019
Annual exports to EU member states reached €23.7b
Santander noted that increased food exports increase Poland’s exposure to external market conditions and is one reason why Warsaw is keeping a close watch on the implementation of EU’s Common Agricultural Policy (CAP), the European Green Deal, and the EU ‘Farm to Fork’ strategy.
It may surprise many to learn that Poland is the EU’s largest producer of Oats, Apples, Rye and Poultry, whilst also being a major contributor of Eggs, Sugar Beet, Pork, Canola, and Beef.
The total farm labour force in Poland is 3.1m people, equivalent to 1.65m FTEs, however the domestic industry in Poland increasingly relies on seasonal workers from non-EU locations to fill short falls in domestic labour supply. Regardless, food production is hugely important to the Polish economy and the EU’s long term food security.
Back to the Santander analysis. We were provided with some interesting data about Santander customer card transactions for the first few weeks of August whereby:
…expenditure in catering establishments not only returned to pre-pandemic levels, but are, on an average weekly basis, more than 43% higher than a year ago.
It was also reported that year to date spending (Jan – Aug 2020) on domestic food consumption is trending 51.7 % higher than the same period in 2019.
So whilst the communist days of ration books and black market trade are distant memories for most, strong domestic demand, growing exports, and further inflation pressures (as forecast) will bring some challenges with regard to affordability of staples as the economy rebounds in 2021.
For more data on Polish food production, I recommend exploring the European Commission (EC) dashboard – Agricultural_Markets or this EC fact sheet on Poland.
For Australian readers: The gross value of Australian agriculture in 2018 / 19 was $62.2b AUD (€37.8b). An excellent report on Australian Agricultural Trade by Rural Bank shows the value of Australian exports in 18 / 19 was $50.7b (€30.8b), import values were $20b AUD (€12.2b), resulting in a trade import / export surplus of $29.9b (€18.2b) which by comparison is 73% higher than Poland.
