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Poland's investment declines at fastest pace in 6 years
November 30, 2016 / 11:55 AM / a year ago

Poland's investment declines at fastest pace in 6 years

* Q3 GDP confirmed at 2.5 pct y/y, 0.2 pct q/q
    * Investment down 7.7 pct y/y, biggest fall in six years
    * Lower inflows of EU funds put lid on investment
    * Analysts say uncertainty also hindering investment

 (Adds detail, comment)
    By Marcin Goettig
    WARSAW, Nov 30 (Reuters) - Poland suffered its biggest
contraction in investment for more than six years in the third
quarter, data showed on Wednesday, as reduced inflows of
European Union aid and political uncertainty discouraged firms
from spending.
    Despite the drop in investment, the data confirmed that the
economy had grown by 2.5 percent year-on-year thanks to a 3.9
annual rise in household consumption supported by a generous
child benefit programme launched in April. The Polish economy
grew by 3.1 percent in the second quarter.
    A breakdown of third-quarter growth published for the first
time on Wednesday showed total consumption added 3.1 percentage
points to the annual growth rate. 
    Investment subtracted 1.4 percentage points and foreign
trade shaved off a further 0.3 percentage points, while
inventories added a 1.1 percentage point.
    Investment fell by 7.7 percent on an annual basis - its
largest decline since the start of 2010, versus a 5 percent
decline in the previous quarter, the data showed. 
    The decline will disappoint Poland's ruling conservative,
eurosceptic Law and Justice Party (PiS), which promised in last
year's parliamentary election campaign to boost investment and
push economic growth towards 5 percent.
    "Companies are withholding investment due to the surrounding
uncertainty, both domestic and external," said Monika Kurtek,
chief economist at Bank Pocztowy.  
    Export growth slowed to an annual 6.8 percent in the three
months to September from 11.4 percent in the second quarter,
reflecting weaker global trade following, among other factors,
Britain's decision in June to exit the European Union. 
    "One cannot expect that investment will turn positive in 
the fourth quarter ... but consumption may accelerate further,"
Kurtek said. 
    Economists have said reduced inflows of EU funds are one of
the main reasons for a slowdown in investment across central and
eastern Europe.
    Economists have also said that increased uncertainty over
policy in Poland has aggravated the decline in investment here.
    Since coming to power last year, PiS has been embroiled in a
conflict with the constitutional court, introduced a new tax on
bank assets and enacted a cut in the retirement age that was
sharply criticised by economists.
    On Tuesday, Finance Minister Mateusz Morawiecki said
Poland's $430 billion economy will likely grow by 2.5 percent to
3 percent this year, revising downward a previous forecast of
3.4 percent. 
    The government initially forecast that Poland's economy
would grow by 3.8 percent this year.

 (Additional reporting by Jakub Iglewski; Editing by Gareth

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