Poland Renews IMF Credit Line for $33.8 Billion

Policy performance strong, but growth has started to slow due to uncertainty in the eurozone

Renewal of credit line will help insure Poland against downside risks

Reforms Needed to boost the economy’s growth potential

In its latest assessment of the Polish economy, the IMF said that Poland’s economy has started to slow after showing resilience since the onset of the global economic crisis, thanks to sound policy frameworks and prudent economic management.

“The new two-year credit line will support Poland’s overall macroeconomic strategy by providing a cushion against risks and by bolstering market confidence,” said Julie Kozack, IMF mission chief for Poland after the Board decision on January 18.

The FCL was created in 2009 for countries with very strong policy frameworks and track records in economic performance. Qualified countries have the flexibility to draw at any time within a pre-specified window on the credit line, or to treat it as a precautionary instrument.

Speaking to IMF Survey, Kozack explained the rationale for renewing the credit line, the reasons behind Poland’ resilience to the eurozone crisis, the policy priorities, and the medium-term challenges the economy faces.

IMF Survey: Poland was the only European Union (EU) economy not to enter into recession during the global financial crisis, and has been one of the best performers in the EU. Recently, though, the economy has slowed. What are the reasons behind the slowdown, and how big an impact is the troubled eurozone having on Poland’s growth prospects?

Kozack: Both external and domestic factors are driving the slowdown of the economy. The demand for Poland’s exports has weakened, as most of the country’s main trading partners are in the euro area.

Developments in the euro area are also taking a toll on domestic demand—Polish households and businesses have started to consume and invest less because they are concerned about continued uncertainty in Europe. Rising unemployment and tighter credit are also affecting household consumption.

But I would emphasize that Poland is experiencing only a growth slowdown. We do not anticipate a recession this year.

IMF Survey: Poland has asked for a renewal of its Flexible Credit Line. What benefits does it derive from having an FCL in place?

Kozack: Poland has derived many benefits from having an FCL. For example, the arrangement allowed for a more flexible policy response at the onset of the global financial crisis in...