Poland managed to avoid the worst of the emerging markets meltdown due to its lower dependence on hot money as well as sound macroeconomic structure. Further, it is one of the few countries in Europe that has been able to weather the economic crisis in the eurozone. The country’s solid economic performance despite the weakness in many of its neighbors can be attributed to the internal strength of the economy, and significant reforms undertaken in the
recent past. (Poland ETF Investing 101).
However, the economy, which survived the four years of economic crisis, began to show new signs of weakness in 2012. Reduced government spending along with waning consumer confidence resulted in slower growth of the economy in 2012. Further, lower export demand attributable to the deepening crisis in the Euro-zone also dampened the growth of the economy to some extent.
But the outlook for the economy seems to have changed. With the eurozone economy reviving, exports from the region are once again strengthening thereby providing a strong support to the economy. Exports climbed 6% in the first six months of 2013.
Moreover, with the increase in export levels, current account deficit which was one of the major concerns for the economy seems to have reversed. After 13 years of current account deficit, the region recorded its first current account surplus. Also, domestic demand which was undermined by a weak economic outlook for the main trading partners of the country is now gaining strength.
Besides, improved retail sales and industrial production are instrumental in getting the economy back into shape. Further evidence of the improving economic outlook going forward is Poland’s reduction in budget deficit and stabilizing government debt. The upgrade of the debt rating outlook by Fitch from stable to positive bears testimony to the same.
In fact, for 2013, the European Commission once again appears to be positive on the outlook for the Polish economy. It anticipates the economy to grow at the rate of 2% in 2013 and 3% in 2014. For the long term, the economy expects its growth rate to reach 4%.
Following a sharp slowdown in 2012, GDP growth is projected to pick up as investment and exports recover. Yet reduced consumer spending and joblessness in particular, remains a matter of concern for the Polish economy. Unemployment stands at 13%.
iShares MSCI Poland Investable Market Index Fund (EPOL)
Investors seeking a broad exposure to the Polish equity market might find EPOL an interesting pick (Poland ETFs Head-To-Head).
The product focuses largely on the large cap segment of the Polish market and holds 43 securities in its basket. The majority of holdings are classified as blend stocks from a style perspective.
The fund is heavily concentrated in its top 10 holdings with nearly 63.2% of the total assets. The top three companies combined to make up nearly 32.2% share of the portfolio.
From a sector perspective, the product has a certain tilt towards the financial sector which makes up 50% of the ETF. Materials and energy sectors also get double-digit allocation in the fund.