beyondbrics

Polish stocks have been hammered in the past two weeks by rising risk aversion among investors, who are spooked by the situation in eurozone countries like Ireland, and now Portugal and Spain. But the country’s economy continues to power ahead.

In data released today, the Polish statistical agency says that the economy grew at an unexpectedly strong annual rate of 4.2 per cent in the third quarter. Analysts had predicted only 3.6 per cent. The main driver of growth was rising domestic demand.

“Continued acceleration of domestic demand will be crucial in the coming quarters in that by providing a shield to potential slowdown of external markets it improves the prospects for the domestic economy,” said a research note by Austria’s Erste Bank.

The economy expanded by an annual 3.5 per cent in the second quarter.

The numbers confirm Poland’s status as one of the fastest growing economies in the European Union. The European Commission recently updated its forecasts for the EU’s economies, predicting that Poland will grow by 3.5 per cent this year, compared to a spring forecast of 2.7 per cent, while in 2011 the economy will expand by 3.9 per cent instead of the earlier prediction of 3.3 per cent.

This quarter, exports, which rose by an annual 9.6 per cent, did not affect gross domestic product numbers because imports also rose by 9.5 per cent.

In one sign of potential future trouble, fixed investment rose by an annual 0.4 per cent after falling by 1.7 per cent in the second quarter, a sign that private businesses are still holding back from spending, something that could impact GDP growth next year.

Poland, the largest of the EU’s new members, was the only country in the bloc to avoid recession last year, and has benefited from its close ties with next-door Germany, which is growing strongly thanks to a boom in exports.

Poland’s zloty, which has been sliding against the euro and especially the dollar over the last week, regained some strength in early trading on Tuesday.