Information Bulletin 12/2004

Transcription

1 Information Bulletin 12/2004 Warsaw, May 2005

2 Compiled from NBP materials by the Department of Statistics as at March 31, Design: Oliwka s.c. Cover photo: Corbis/Free Layout and print: NBP Printshop Published by: National Bank of Poland Department of Information and Public Relations ul. Âwi tokrzyska 11/21, Warszawa, Poland phone: (+48 22) , fax: (+48 22) Copyright by the National Bank of Poland, 2005 ISSN

3 Contents 1. Social and economic situation of the country Sold production of industry Price level Labour market Wages and salaries of employees and social benefits National budget Money supply and counterparts Structure of the money supply M3 and counterparts Credit to other domestic sectors Credit to central government net External assets net Monetary policy of the central bank Interest rates Reserve requirement Foreign exchange rates Primary T-bill market Open market operations Balance of payments in the third quarter of Main developments in the balance of payments in the third quarter of Current account Deteriorated current account balance Increase in trade in goods deficit Foreign trade turnover on the basis of customs statistics Increase in export of goods Growth in the imports of goods Increase in the balance of services Travel Transportation Other Services Decrease in the negative balance of income Increase in the positive balance of money transfer Capital account Financial account Non-residents investments in Poland Negative balance of foreign direct investment Inflow of the portfolio capital Outflow of other foreign investment Residents investment abroad Increase in resident s investment abroad Financial derivatives Official reserve assets

4 5. Principal decisions of the Monetary Policy Council Statistical Appendix Tables Charts Seasonally-Adjusted Time Series Methodological Notes

5 Social and economic situation of the country 1 Social and economic situation of the country 1 Table 1.0. Selected categories of real economy (%) Specification Monthly growth I Increase in 2004 Industrial output Consumer prices of goods and services Industrial output prices Construction prices Average employment, corporate sector Average monthly remuneration of employees, gross, corporate sector Average monthly employee old-ages and disability pensions, gross * Data not published by GUS. Source: GUS figures Sold production of industry In 2004 the highest GDP increase in seven years was reported. The high level of internal and external demand resulted in an improvement of production outcome. In 2004 the sold production of industry was 3.5 percentage points higher than a year ago and stood at 11.%. The break of Q2 and Q3, i.e. immediately prior to EU accession, registered a particularly high level of sales. Among the fastest developing branches of industry were those with relatively high share in exports as well as those producing investment goods. Participation of private sector in the sold production of industry increased when compared to 2003 from 79.0% to 81.%. The high level of production was preliminary determined by a good outcome in manufacturing with its almost 85% contribution in the total sales. In 2004, the value of sales in this sector increased by 14.5%. In mining and quarrying the production increased by 1.9% whereas for electricity, gas, steam and hot water supply it decreased by 1.8%. An exceptionally rapid growth of sales (by 35%) was maintained by non-financial institutions producing investment goods. 35%. This trend particularly affected the production of motor vehicles, trailers and semi trailers which contribute to almost half of total sales within this group. Production of consumption goods in the said period increased by 19% and supplied goods by 12% approximately. Sales of non-durables rose by approx. 7% among which those connected to energy by approx. 1%. Almost 40% growth in sales, when compared to 2003, was reported for in non-financial corporations producing the means of technical progress. Their share in total sold production of industry for industrial corporations of more than 49 employees increased (in current prices) form 13.7% in 2003 to 15.9%. 21 of 29 branches of industry increased their sales when compared to The highest growth pertained to manufacture of motor vehicles, trailers and semi-trailers by 5.4%, manufacture of basic metals by 20.2%, metal products by 19.0%, of machinery and equipment by 1.2% and of rubber and plastic products by approximately 15%. INFORMATION BULLETIN 12/2004 5

6 Social and economic situation of the country 1 Figure Sold production of industry (corresponding period of the previous year = 100) % I I I TOTAL Manufacturing Source: Central Statistical Office (GUS). Mining and quarrying Electricity, gas and water supply The increase in sales was accompanied with a growth in industrial productivity measured with the sold production of one employee. This indicator was approximately 13% higher than a year ago, which resulted form a 0.4% decrease in average employment. Construction In 2004 no improvement occurred in construction. Preliminary estimations indicate that construction and assembly production in 2004 was nearly 1% lower than a year ago. A significant 7.4 % decrease when compared to 2003 was observed in construction and assembly companies. Insignificantly lower level of production, when compared to 2003, by approximately 0.5% was disclosed by civil engineering enterprises. The worst production output was noted for entities operating in constructions and roofs, water engineering and specialist construction contracts. Increase in production output was reported for road engineering. Increase in sales was disclosed for enterprises active in the field of furnishing works. Share of the private sector in construction output of 2004 amounted to 98% and was comparable to the level reported in the previous period Price level At the end of 2004, prices of sold production of industry were 5.% higher than in the previous year. The mid-year increase thereof stood at 7.0% (2.% in 2003). The dynamics of sold production of industry prices (measured by PPI index), having achieved its maximum growth in May 2004, was declining systematically. From May to December 2004, it declined by 4 percentage points. Increase in prices of raw materials (oil and metals) contributed to a general increase in prices which in turn translated into a price increase in manufacturing. Estimates indicate that the highest increase in prices occurred in mining and quarrying by 1.2 % yearly. Since May 2004, however, the price growth dynamics decreased almost by half. A considerably high price increase was reported in manufacturing by 5.%. The highest increase was noted for coke and refined petroleum products by 38.% and metals by 2.9%. Prices in category electricity, gas, steam and hot water supply were higher by 0.% than a year ago. In this case the increase was curbed by the method adopted for setting prices. Most prices in this section are regulated by the Energy Regulatory Office (Urzàd Regulacji Energetyki). Prices in construction have been growing systematically throughout At the end of the year this increase totaled.2 percentage point. At the end of December 2004 the prices in construction and assembly production equaled 4.8% which, when calculated on a semi-annual basis totaled 2.5%. N a t i o n a l B a n k o f P o l a n d

7 Social and economic situation of the country Figure Sold production of industry prices indices (corresponding period of the previous year = 100) % I I I TOTAL Manufacturing Mining and quarrying Electricity, gas and water supply Construction and assembly production When compared to 2003 the highest increase in prices was reported for the construction and finishing works, rental of construction and demolition equipment and construction installations. Prices in site preparation, construction and civil engineering increased below the average level. Following the period of accelerated growth in the pre accession period, the average consumer price index was stabilized in the second half of In this period prices measured with the CPI index stood at approximately 4.5% on an annual basis. The semi annual growth of consumer prices amounted to 3.5% up in comparison to the one recorded during past two years and the estimations put down in the budgetary act. The CPI index was greatly influenced by high prices of food and fuel. By the end of 2004 food and non alcoholic beverages which have the highest share in the consumption expenditure of the population rose by 7.8% i.e. 3.4 points above the inflation indicator. June brought the highest level of price increase. Such an increase from 5.2% to 8.1% resulted form adjustment of process to the EU market situation. The said increase resulted from the adaptation of domestic prices to the EU ones. Constant growth of prices stabilized in August. Since the beginning of the year the biggest growth in prices was reported for sugar by 44.%, which translated into a 17.0% increase in the group "sugar, jam, honey, chocolate and confectionery. Prices of articles in the group oils and other fats increased by 10.8%. Prices of meat rose by approximately 10%, price of beef increased by nearly 25%. Bread and cereals disclosed a 5.3% growth. Prices of products from group milk, cheese, eggs were increased by 5.1%. Prices of fruit grew by 3.1% whereas prices of vegetables were diminished by 1.8% in comparison to a year ago. A decisively higher increase in prices was reported for transport. Consumption expenditure for that purpose was more than three times lower than those for food. At the end of 2004 the annual price increase for transportation goods and services totaled 9.%. Thus the semi annual growth of the aforementioned amounted to 7.2%. The most significant growth in prices, when compared to the previous year, affected mostly operation of personal transport equipment the cost of which increased by 9.7% where increase in the cost of fuels grew by 12.4%. Lower costs were borne by users of the public means of transport. Prices of transport services increased by 3.7% of which rail transport grew by 5.0%. Prices of passenger s cars increased by 3.4%. The growth of prices of goods and services in housing and utilities, which constitutes 20% of the consumer s budget was slightly higher (by 4.1%) than the general level of prices in Rental fees increased by 3.% and sources of energy grew by 3.0%. Increase in prices of goods and services with regard to house furnishing and home maintenance stood at 1.8%. INFORMATION BULLETIN 12/2004 7

8 Social and economic situation of the country 1 Figure Selected prices of consumer goods and services (corresponding period of the previous year = 100) % I TOTAL Clothing and footwear Transport Foods and non-alcoholic beverages I I Housing Communication Alcoholic beverages and tobacco products Health care In 2004 increase in prices of alcoholic beverages and tobacco (2.%) health care (2.0%) and education (2.7%) did not exceed the average CPI index. A 0.2% decrease has been reported for the prices of communication of which the prices of internet services fell by 1.3%. Prices in clothing and footwear decreased by 3.%. The 2004 increase in prices measured with HICP (Harmonized Consumer Price Index) amounted to 3.% when compared to the relevant period of Labour market Gradually increasing results of real sphere did not translate into improvement of the labour market. Improved production results were an outcome of restructuring process resulting in an increase in productivity which in turn propelled the broadening of scope without the necessity to increase the demand. Notwithstanding the tendency to reduce the average employment in the corporate sector aligned with the high unemployment rate, last year brought the negative phenomena on the labour market to an end. The decrease in employment decisively slowed its pace in Average employment rate in manufacturing stood at thousand down by 0.9% when compared to a year ago. In 2003 the abovementioned decrease amounted to 3.8%. Reduction of employment was noted for mining and quarrying, transport, storage and communication, electricity, gas and water supply and construction. Increase in the number of employed occurred mainly in services real estate and enterprises, hotels and restaurants, trade and repairs and in sectors characterized with high level of sales namely in the manufacture of motor vehicles, trailers and semi-trailers, manufacture of furniture, metal products, machinery and electrical apparatus, food and beverages as wells as non-metallic products and others. In December 2004, an average employment rate in manufacturing stood at thousand, up by 0.2 % when compared to a year ago. By the end of December 2004, the number of registered unemployed amounted to thousand persons up by 57.0 thousand when compared to a previous month but 17.1 thousand down than a year ago. The December increase in the number of the unemployed was of a seasonal character. It resulted with the 0.4 points increase in the unemployment rate up to the level of 19.1%. The said increase however was 0.9 points lower than a year ago. 8 N a t i o n a l B a n k o f P o l a n d

9 Social and economic situation of the country Figure Number of the unemployed and the unemployment rate in thousand 3,300 3,200 3,100 3,000 % ,900 I I I 18.5 Total unemployed (left axis) Unemployment rate (right axis) The number of newly registered unemployed in 2004 amounted to thousand i.e thousand more than in the previous year. Unemployment affected mostly young people, almost 30% of which were persons aged of low occupational qualifications. Two-thirds of the general number of unemployed comprised persons with vocational, secondary or lower education. At the end of December 2004 the number of long term unemployed persons decreased from 101. thousand to thousand on an annual basis thus being 52.2% of the registered unemployed. At the end of thousand persons remained without benefit rights which constituted 85.8% of total registered unemployed Wages, salaries and social benefits Average monthly gross wages and salaries of employees in the sector of enterprises in 2004 amounted to PLN up by 4.1% than a year ago. In the respective sector, real the purchasing power of wages and salaries, increased by 0.8%. Higher than average increase in wages and salaries were reported for mining and quarrying by 7.0%. gas, electricity and water supply by 5.1%, manufacturing by 4.7% and construction by 4.3%. Wages below the average occurred for hotels and restaurants by 1.8%, servicing real estate and enterprises by 2.2%, transport, warehousing and communication by 3.1% and trade and repairs by 3.8%. Among the branches of manufacturing vital for employment ratio in the enterprise sector, the fastest growth in wages and salaries was noted for branches characterized with a considerably high growth of sales. Increase in salaries for enterprises producing motor vehicles, trailers and semi- -trailers were 9.1% whereas for enterprises producing machinery and appliances it stood at.0% and 5.5% in enterprises manufacturing metal products. In December, average monthly gross wages and salaries of employees in the sector of enterprises in 2004 amounted to PLN up by 3.2% than a year ago. Difference between the average monthly salary in private and public sectors stood at a considerable PLN 500 level. In 2004, the average monthly salary for the public sector amounted to PLN i.e. up by 5.1% than a year ago, whereas for the private sector these figures stood at PLN and 4.2% respectively. The ratio of the average gross wages and salaries in the private sector to average wages and salaries in the public sector was 81.2%. In 2004, the average monthly gross retirement pays and pensions form non-agricultural social security system stood at PLN and was thus higher by 4.4% than a year ago. In the respective, period the purchasing power thereof increased by 0.%. The average monthly gross INFORMATION BULLETIN 12/2004 9

10 Social and economic situation of the country 1 Figure Wages, Salaries and social benefits in zloty 2,800 2,750 2,700 2,50 2,00 2,550 2,500 2,450 2,400 2,350 2,300 I I I in zloty 1,170 1,10 1,150 1,140 1,130 1,120 1,110 1,100 Average monthly wages and salaries in industry (left axis) Average monthly retirement pay and pension (right axis) retirement pays and pensions of farmers amounted to PLN up by 2.8% than a year ago. In the respective period the purchasing power thereof decreased by 1.0%. In 2004, the gross amount of unemployment benefits (excluding social insurance premium) was PLN million, down by 7.8% than in the previous year. Payments from benefits and pre-retirement benefits equaled PLN million i.e. they increased by 17.% in comparison with the previous year National budget In 2004 the central government revenue amounted to PLN 15.3 billion up by 4.1 billion than a year ago. When compared to 2003, inflows arising from direct taxes, government revenues and other income were considerably higher in Inflows on personal and corporate income taxes, and customs duties on the other hand, were lower than in the previous year. Regardless of the comparably lower income on CIT and customs duties, revenues form these exceeded the stipulations of 2004 budgetary act by 34. and 18. points respectively. For the first time in several years revenues on privatization disclosed a surplus. Majority of funds there from was reported in November as a direct outcome of PKO BP privatization. During the period in question there was an increase in central government expenditure, which amounted to PLN billion i.e. PLN 8. billion more than in the previous year. 99% of the scheduled amount has been spent already. Lower then estimated expenditure resulted from savings in the field of foreign debt servicing, which in turn stemmed from high appreciation of zloty. In 2004, all subsidies vis- -vis Social Insurance Fund, Labor Fund and Agricultural Social Insurance Fund were allocated. Expenditures thereon totaled PLN 39.2 billion. Decisively lower Labor Fund subsidies resulted from a limitation of the scope of its activity and transposition of part of its tasks to the Social Security Institution. PLN 31.4 billion allocated for local governments, similar to the 2003 level, have heavily contributed to the expenditure. Higher than estimated credits of the state budget (up by 1.1 percentage point) with lower debits (1 percentage point) allowed for fulfillment of the budget the deficit of which was 8.4 percentage points lower than estimated in the Budgetary Act and amounted to PLN 41.5 billion. Great part of the said deficit was financed with domestic resources. External resources comprised 7.5% of the general sum of the financed deficit. Estimations indicate that the relation of public debt to GDP in 2004 amounted to 50.5% i.e. 1.1 points less than a year ago. 10 N a t i o n a l B a n k o f P o l a n d

11 Social and economic situation of the country Table Estimated national Budget Performance for the period January December 2004 (million PLN) Specification 2004 Budget Act Performance Performance of Budget Act in % 1 Revenue 154, , of which indirect taxes 103, , corporate income tax 9, , personal income tax 22, , revenue of central government institutions 13, , of which revenue from customs duty 1, , other revenues 5,738.9, of which payments from NBP s profits 4, , Expenditure 199, , of which: domestic debt service 18, , foreign debt service 4, , subsidy for the Labour Fund 1, , subsidy for the Retirement and Disability Fund 15, , subsidy for the Social Insurance Fund 22, , general subsidies for local government institutions 31, , Budget deficit -45, , Financing of deficit domestic 43, , foreign 2, , Source: Ministry of Finance. INFORMATION BULLETIN 12/

12 Money supply and counterparts 2 2 Money supply and counterparts 2.1. Structure of money supply By the end of December 2004 the value of money measured by the M3 aggregate, reached PLN 39.5 billion, which signified a 2004 growth by PLN 29.4 billion see table The amount of growth was PLN 11.3 billion higher than a year ago. Providing the exchange rate fluctuations are omitted the discrepancy in the value of money in 2003 and 2004 would have amounted to PLN 22.9 billion. Zloty appreciation by 19.9% against the US dollar, by 13.4% against the EUR and 12.5% against the Swiss franc resulted in a decrease in M31, foreign exchange components for 2004 by PLN 8.8 billion of which PLN 3. billion in overnight deposits and PLN 5.2 billion in liabilities with agreed maturity up to 2 years. In 2003, the exchange rate fluctuations took the opposite course and thus the nominal M3 amounted to PLN 2.7 billion. The main reasons for the growth of money were the increase in M3 from 5.% in January to 8.7% in December The constant growth of this indicator was first reported in October 2002 when the downward tendency reached its minimum at -2.5%. High demand for M3 in 2004 resulted mainly from the PLN 1.9 billion growth of funds on current accounts of enterprises. The value of deposits of non-monetary financial institutions and self governments increased decisively. Decline in private savings, by PLN 2.5 billion, was observed during three consecutive years. Furthermore, claims in repo transactions grew by PLN 2.1 billion. The above situation resulted from accounting approach employed by two major banks in sell-buy- -back transactions. In previous periods the banks booked received assets on off-balance sheet accounts of credits vis- -vis sale/purchase of securities. Now, the claims in question are registered on balance sheet accounts. Table Money supply Specification Quarterly growth Annual growth billion zloty % billion zloty % 1. CURRENCY IN CIRCULATION (ECLUDING AULT CASH) Overnight deposits and other liabilities M1(1+2) Deposits and other liabilities with agreed maturity up to 2 years and blocked deposits Deposits redeemable at notice up to 3 months Repurchase agreements Debt securities issued with maturity up to 2 years M3 ( ) Influence of Exchange rate fluctuations was calculated on the basis of 7 currencies euro, US dollar, Swiss franc Danish crown, Swedish crown, British pound and Japanese yen. As far as liabilities against other domestic sectors are concerned, the first three of the abovementioned currencies comprise 97% and 99% in the currency structure. 12 N a t i o n a l B a n k o f P o l a n d

13 Money supply and counterparts Similarly to a year ago, the highest increase in the M3 was reported in the Q4. This increase however was nominally almost twice as high as in the previous year and amounted to PLN 17.2 billion. Adjusted for the seasonal factors, the above amount would have been even higher. Record- -breaking appreciation of zloty against major currencies resulted in PLN 5.8 billion decrease in M3. In October 2004, money supply disclosed a major deviation form the long-term tendency. Increase in the M3 by PLN 19. billion resulted mainly from the PLN 13. billion liabilities to non- -monetary financial institutions which in turn was an outcome of placing deposits for stocks of PKO BP and Wydawnictwa Szkolne i Pedagogiczne. These resulted mainly from bank loans drawn by individuals thus the highest so far increase in liabilities of individuals. A considerable increase in banks credits vis- -vis households was yet another outcome of the aforementioned privatization. Privatization resulted in high increase of banks credits vis- -vis households. Department of Statistics estimates at least PLN 17 billion increase in M3 supply as an outcome of the privatization. Upon over 90% reduction of calls the money supply in the following month dropped by PLN 14.1 billion and deposits non MFI decreased by 10.1 billion. Withdrawn funds were partially allocated for the repayments of bank loans drawn for the purpose of buying shares. The end of privatization activities also influenced the decrease in bank liabilities vis- -vis households. 2 When compared to December 2003, a further increase in the liquidity of M3 from 4.5% to 47.% measured by the share of currency in circulation (excluding vault cash) and overnight deposits of other domestic sectors in M3 see chart This tendency has been increasing since 2001 yet in mid 2004 came to an abrupt end. From May to December 2004, it declined by 0, percentage points. The main reason for decrease in the liquidity of broad money was a growth in tendency of private entities to place their savings on deposits with agreed maturity, which was accompanied by a simultaneous reduction of assets on current accounts. Q4 witnessed a further decline in the level of liquidity of liabilities within the framework of M1 measured with the share of currency in circulation (excluding vault cash) in the M1. By the end of December 2004 the value of this indicator declined to 28.9% which signifies a 2.4 points drop when compared to the corresponding period of the pervious year see chart Despite an PLN 1.4 billion annual increase for the cash in circulation it comprised as little as 7.7% of an increase in the M1. By end December 2004 deposits and other liabilities 2 of other sectors included in M3 increased by billion, up by 23.4 billion than in the corresponding period of the past year see table The value of growth was comparable with the result of 2001, which preceded a remarkable drop in private deposits market. Should the value of deposits be adjusted for exchange rate fluctuations, its amount would be higher by PLN 8.8 billion. Figure Share of currency in circulation (excluding vault cash) and overnight deposits of other domestic sectors in the M3 against annualized percentage changes of M1 and M3 in thousand share (%) I I I I I I I I M1 M I Share of currency in circulation and overnight deposits in M3 2 Current deposits, deposits with maturity up to 2 years and deposits with maturity period up to 3 months comprise 99% of liabilities of other sectors included in M3. INFORMATION BULLETIN 12/

14 Money supply and counterparts Figure Share of currency (excluding vault cash) in the M1 2 % I I I I I I I I I Table Deposits and other liabilities included in M3 Specification Quarterly growth Annual growth billion zloty % billion zloty % DEPOSITS AND OTHER LIABILITIES INCLUDED IN M Households of which: individuals Non-monetary financial institutions Non-financial corporations Non-profit institutions serving households Local government Social security funds Corporate deposits decisively contributed to an increase of assets on the bank accounts. Decline in private savings was observed during three consecutive years. The value of deposits of non-monetary financial institutions and self governments increased decisively in the respective period. A PLN1.9 billion increase in the volume of deposits of non-financial corporations in 2004 was a reflection of good economic results in the respective period. On the other hand, keeping high balances on bank accounts with agreed maturity (increase above PLN 7 billion) is a proof to continuous restraint within the sector. A fast growth of deposits before Poland s accession to the EU was followed by the period of stabilization of a very high level, increase by PLN. billion in December High inflow of assets on corporate accounts is a seasonal phenomenon, which results from increased sales in Christmas period as well as form transferring assets from bank accounts on deposit accounts as of the end of balance year. Negative profitability of corporate deposits, with regard to sold production of industry, did not result with a decrease in its growth dynamics which amounted to 20% annually. Non-fiancial corporations tended to minimize losses via active management of assets on bank accounts with agreed maturity which occurred more profitable when compared with current accounts more on the subject in Information Bulletin 9/2004. By the end of December 2004, difference in valuation of current deposits and deposits with agreed maturity amounted to 3 points 0.3% and 3.3% respectively. Individuals deposits declined in Dynamics of such decline however was relatively slower when compared to previous years. Reduction in the volume of deposits amounted to PLN 2,5 billion and was definitely lower than in 2002 and 2003 down by PLN 7.7 billion and 5.0 billion. 14 N a t i o n a l B a n k o f P o l a n d

15 Money supply and counterparts The year 2004 witnessed also serious changes in individuals behavior with regard to deposits. Systemic increase of assets on the individual s overnight deposits resulting from popularization of cashless turnover has been ceased. The increase in volumes on current accounts by the end of December 2004 amounted to -1.4%, down when compared to annual 10 15% fluctuations of Nominal decrease in overnight deposits for 2004 amounted to PLN 0.7 billion. It is to be emphasized that in 2002 and 2003 banks reported an increases thereof, up by PLN 5.2 billion and PLN 5.7 billion respectively. Two periods of balance reduction for individual accounts were reported for the past year. Steep decline in individuals savings in the March April period resulted from increased expenses (housing and real estate) which, on the other hand were an outcome of the 22% AT on construction materials introduced as of May 1, Decrease in the volume of deposits amounted to PLN 1.1 billion. 2 Phase two of the abovementioned reduction commenced in July and was effective thorough the end of the year. Predictability of customers behavior was abridged by a considerably high October increase in deposits (up by PLN 5. billion) determined by the introduction of PKO BP and Wydawnictwa Szkolnie i Pedagogiczne to the stock exchange. Upon over 90% reduction of calls the decrease on current accounts amounted to PLN.4 billion. Thus in the July December period overnight deposits of individuals decreased by PLN 2.1 billion. Adjusted for appreciation of zloty, the outflow of assets form overnights amounted to PLN 0.7 billion. Maintenance of overnight deposits occurred quite cost consuming especially with increasing inflation. As long as the half of 2003 the overnight deposits were characterized with negative profitability. The said profitability however reported a decisive decrease from -1.8% in April to -3.9% in June. By the end of December 2004 the difference in profitability between overnight deposits and deposits with maturity up to 1 year amounted to 4 percentage points adequately -4% and 0%. It definitely succored the Q3 shift of savings from overnight deposits to deposits with agreed maturity. Upon a continuous Q3 decrease in deposits with agreed maturity a slight increase was reported. It resulted from nominal increase of interest rates notwithstanding the low real profitability thereof. In October, however, the value of deposits with agreed maturity decreased by PLN 2.4 billion as a result of the abovementioned privatization processes. In the subsequent months of Q4 the increase in savings amounted to PLN 5.4 billion. Adjusted for exchange rate fluctuations the increase was up by PLN 1.7 billion. Thus the annual growth rate of savings with agreed maturity increased from -7.4% to -1.4% whereas the growth rate of PLN deposits with agreed maturity reported a positive outcome for the first time since the early Increase in individuals drive towards saving was accompanied with a decisive change in the organizational structure of the PLN deposits with agreed maturity up to 2 years (current accounts excluded). Deposits of extended maturity ( months to 1 year) were especially popular see chart Share thereof in the deposits market increased from 21% in March to 28% in December. Nominal increase on these accounts amounted to PLN 8. billion. Simultaneously, the value in deposits with maturity up to 3 months decreased by PLN 5.3 billion. Shift of assets between maturity periods resulted form clients reaction to deposit policy of major commercial banks. Monetary flows were determined by attractiveness of marketed banking products, maturity period of deposit contract included. Overnight deposit with interest exceeding average calculated for the largest banks introduced in December 2004 launched an increase in deposits with agreed maturity from 1 to 3 months. High level of increase in banking deposits of individuals which occurred by the end of the year, save for annual remuneration for persons employed in mining and extra severance payments, originated from savings placed on 3 year deposits in 2001 (not included in the M3). Stocks for November and December decreased by PLN 2. billion. Debt securities issued by banks and sold to non-banking entities (included in the money supply) decreased by 0.7 billion. ast majority of the abovementioned comprised anti-tax bills issued by several commercial banks for their individual customers. Furthermore payments of EU appropriations continued in December. INFORMATION BULLETIN 12/

16 Money supply and counterparts Figure PLN deposits with agreed maturity up to 2 years quarterly changes in PLN million 2 7,000,000 5,000 4,000 3,000 2,000 1, ,000-2,000-3,000-4,000 zloty million I quarters Up to 1 month Over 3 up to months Over 1 year up to 2 years Over 1 month up to 3 months Over months up to 1 year TOTAL Increase in savings was to a lesser extent influenced by moving the assets from currency deposits. Q4 reduction of currency deposits were effected by exchange rate fluctuations. High appreciation of zloty against USD did not cause withdrawal of deposits denominated in foreign currencies. Real decrease thereof in Q4 amounted to PLN 0.7 billion. Q4 witnessed a moderate by PLN 0. billion increase in cash (outside bank vaults). Despite nominal increase the annual dynamics decreased to the level of 2.7% which constituted a decrease by 14.4 percentage points M3 and counterparts In Q4 the increase in money supply stemmed from the growth of net credit to central government net by 4.1 billion and claims on other domestic sectors by PLN 1.4 billion see table Increase in M3 supply resulted also from reduction of the negative balance of other items net by PLN 15.3 billion, which originated from the transfer of assets from current accounts to deposit accounts. Another factor which has contributed to reduction of the abovementioned negative balance of other items net was the exchange fluctuations, which led to a decrease in passive counterparts to the appreciation of zloty. PLN 5.9 billion decrease of external assets net also contributed to the decrease of assets on the market. Table M3 and counterparts Specification Quarterly growth Annual growth billion zloty % billion zloty % M3 ( ) and counterparts Counterparts 1. Net external assets Credit to other residents Credit to central government, net Longer-term financial liabilities Fixed assets (excluding financial fixed assets) Other items, net N a t i o n a l B a n k o f P o l a n d

17 Money supply and counterparts Increasing debt of individuals also influenced the M3 and counterparts loans to this sector comprised the most important factor thereof in three consecutive years. It was also influenced by the increase in external assets net. Decrease in negative balance of other items net resulted from changes in items compensating the exchange rate fluctuations resulting form the appreciation of zloty Credit to other domestic sectors 2 In Q4 the value of credit to other domestic sectors 3 grew by PLN 0.5 billion. This growth reflected an increased debt of individuals (up by 3.3 billion), social security fund (by 0.8 billion) local government (up by 0.7 billion) whereas debt of non-financial corporations disclosed a decrease by PLN 2.7 billion. Changes which occurred in Q4 did not alter the situation on credit market. Liabilities of individuals increased rapidly, up by PLN 12.4 billion. However, no recovery on the corporate loans market occurred. Total decrease in debt of this sector amounted to PLN 5 billion, which would indicate a decisive decrease in loan demand especially when compared to 2003 growth within this category (up by PLN 3.4 billion). The level of debt was largely affected by exchange rate fluctuations with regard to high appreciation of zloty against other currencies. The abovementioned factor exercised its most significant influence in Q Exchange rate fluctuations exercised the most significant impact on the debt of non-financial corporations and individuals thus reducing the value of their debt by PLN 5.2 billion and PLN 4.2 billion respectively, whereas in Q4 these figures were PLN 2.8 billion and 2.3 billion. In 2003, the exchange rate fluctuations took the opposite course and thus the liabilities of banks increased by PLN 4 billion and PLN 2.2 billion respectively. Adjusted for exchange rate fluctuations annual increase in debt for 2004 was PLN 0.8 billion higher than a year ago while the nominal changes indicated the PLN 9 billion decrease in debt. Thus crediting activities were similar for both periods. Adjusted for exchange rate factors shed new light on changes occurring on the market of loans for individuals. Annual nominal increase between 2004 and 2003 amounted to PLN 1. billion. Thus real difference grew by PLN 7.9 billion which indicates a sharp increase in demand for individuals loans in Changes in particular credit items of other domestic sectors, which are further subdivided by sectors, are presented in table Table Credit to other domestic residents Specification Quarterly growth Annual growth billion zloty % billion zloty % Credit to other domestic residents Households of which: individuals Non-monetary financial institutions Non-financial corporations Non-profit institutions serving households Local government Social security funds Other domestic sectors comprise non monetary financial institutions, subjects of non-financial sector, self-governments, and social security funds. The category includes liabilities vis- -vis loans and credits, guarantees and warranties, interest due and other liabilities (securities excluded). INFORMATION BULLETIN 12/

18 Money supply and counterparts Loans and other claims on non-financial corporations 2 Claims on non-financial corporations against loans and credits decreased by PLN 2.4 billion in Q4 and by PLN 4.4 billion in The value of loans denominated in foreign currency decreased by PLN 3.9 billion in Q4 and by PLN 10.8 billion in Provided that the exchange rate fluctuations are not omitted, the real drop in the value of loans denominated in foreign currencies stood at PLN 1.2 billion and PLN 5.9 billion respectively. Non-financial corporations preferred loan facilities denominated in PLN. The value thereof increased by PLN.4 billion on Such a situation may be partly explained with decreased demand for investment loans encumbered with the highest rate of foreign currency debt. Thus entrepreneurs disclosed a very low level of investment risk. Despite satisfactory economic results, entrepreneurs waited for the solid economic growth to be confirmed. Loans were appropriated for current liabilities. In 2004, increase in the short term loans denominated in zlotys amounted to PLN 4.8 billion while investment loans and housing loans increased only by PLN 1.8 billion. Relatively high exchange rate of zloty might have contributed to the decrease in foreign currency debt. The share of loans denominated in PLN on operational and current account increased from 37.9% to 43.5%. Investment loans decreased from 33.8% to 31.4% as a result of a decrease in foreign currency debt. Reduction in investment loans was to some extent compensated with an increase of housing loans. This group of loan facilities had the larges dynamics of growth in The said dynamics for Q4 stood at 15% on an annual basis see chart Significance of housing loans in credit portfolio of non-financial corporations increased from 10.4% to 12.2%. Low demand on credit facilities denominated in foreign currencies in 2004 as well as zloty appreciation resulted in a decrease of their share in total credits extended to non-financial companies down from 32.5% to 24.4%. Currency debt prevailed in export credits, marginal in credit portfolio. Decrease in the share of currency debt was as follows: credits on current account down from 12.9% to 7.0% exports down from 89.1% to 7.5% working capital down from 30.2% to 20.0% investments down from 44.3% to 3.1% real estate down from 33.0% to 32.3%. In the preceding year the significance of state-owned enterprises, which are services by large banks, continued its downward tendency The overall value of credits extended vis- -vis this group decreased by PLN 3.7 billion, in which investment loans decreased by PLN 2 billion. By end December the share of loans extended vis- -vis state owned enterprises in the total indebtness of non-financial corporations amounted to 15.2% down by 2.5 points than a year ago. Figure Annual changes to liabilities of non-financial corporations vis- -vis loans and credits % I I I I I TOTAL Lonas on current account Investment loans Working-capital I For the purchase of real property 18 N a t i o n a l B a n k o f P o l a n d

19 Money supply and counterparts Adjusted for annual changes which occurred in 2004, only small companies (of nine employees) so called single proprietorships disclosed a positive growth in debt. These companies in the banking statistics are regarded households, not non-financial companies. Should theses be included in the non-financial corporations sector the total share in debt thereof would amount to 11% approximately. In 2004 the amount of loans extended vis- -vis small enterprises increased by almost PLN 0.25 billion adjusted for the exchange rate fluctuations the increase amounted to PLN 0. billion. Majority of loan facilities (45%) were appropriated for operational purposes. Investment loans constituted approximately 37% of their debt. 2 Small enterprises could count on support of small banks and cooperative banks. Credits and loans for individuals In 2004, nominal debt of individuals against credit and loan facilities increased by 10. billion and thus reached the level of the previous year. Adjusted for exchange rate fluctuation factor the amount of loans extended was PLN 4 billion higher. Individuals appropriated their loan facilities mainly for housing expenses. Banks reported a PLN.2 billion increase within this category, of which loans denominated in PLN stood at 4.7 billion. Last quarter of 2004 brought greater interest in loans denominated in foreign currencies, although certain signs of market revival occurred as early as the first half of Real growth of foreign currency loans disclosed in Q4 was four times higher than the increase of loans denominated in PLN see chart Debtors seemed to have trusted a continuous strengthening of PLN on the currency market. No such behavior was observed among entrepreneurs. Figure Quarterly increase of housing loans vis-á-vis individuals in million PLN 2,500 zloty million 2,000 1,500 1, I quarters Zloty Foreign currency Foreign currency adjusted for exchange rate Figure Annual changes in liabilities of individuals against credits and loans million zloty I 2002 I I I I I TOTAL Housing loans Hire-purchase loans Loans on current account INFORMATION BULLETIN 12/

20 Money supply and counterparts The second half of 2004 witnessed a decisive growth in other loans, up by PLN 3.8 billion. These comprised: hire purchase loans: up by PLN 1.2 billion, cash loans etc. This category was characterized with a high decrease dynamics of 20% on an annual basis see chart Increase in debt confirms gradual recovery of consumption demand. 2 Among the special events of Q4 a record-breaking October increase of loans against the purchase of securities (up by PLN 13.9 billion) with regard to privatization of PKO BP and Wydawnictwa Szkolne i Pedagogiczne. Upon high level reduction of calls the vast majority of abovementioned loans were paid during the following month. Such a phenomenon is similar to privatization of Polski Koncern Naftowy Orlen of Notwithstanding the considerable increase of loans vis- -vis individuals in 2004, these were not significantly encumbered with bad loans. Bad loans comprised 7.3% of the total loans,.5% of which were lost loans. Loan portfolio of non financial corporations disclosed a decisively poorer quality. Bad loans for the non-financial corporations stood at 20.4% whereas lost loans thereof amounted to 11.%. Both above case studies indicate a significant improvement in debt servicing Credit to central government net In Q4 credit to central government net in the banking system disclosed a PLN 4.1 billion. The general growth of net credits was largely affected by changes noted in the balance sheet of the National Bank of Poland see table Upon a significant drop of debt to this sector (down by PLN 8.4 billion) in November, December witnessed an increase by PLN 12. billion. Placing funds on PLN deposits with agreed maturity by the Ministry of Finance influenced November reduction of credit to central government net. olume of credit thus increased by PLN.2 billion and totaled PLN 19.3 billion. Majority of these funds, amounting to PLN 5.2 billion, originated from the put stock of PKO BP. Furthermore the Ministry of Finance transferred to PKO BP approximately 20% of the amount earned from the stock put i.e. PLN 1.4 billion. As of December the government decided to dissolve the greater part of PLN deposits, which was typical for the period in question. olume thereof amounted to PLN 2.5 billion. Despite the high growth of credit to central government in December 2004, the annual rate disclosed a downward tendency (down by PLN 0.8 billion). The central government drawn credits form off-banking sector via issuance of T-bonds external markets included and privatization of state owned companies. Table Credit to central government net Specification Quarterly growth Annual growth billion zloty % billion zloty % A. CREDIT TO CENTRAL GOERNMENT (1+2) NBP OTHER MFIs of which: loans debt securities issued B. DEPOSITS OF CENTRAL GOERNMENT (3+4) NBP DEPOSITS DEPOSITS AND OTHER LIABILITIES OF OTHER MFIs of which: overnight with agreed maturity CREDIT TO CENTRAL GOERNMENT, NET (A B) N a t i o n a l B a n k o f P o l a n d