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First half of 2017 in Polish economy
Data dodania: 27.09.17

The GDP growth rate in Poland in 2016 reached 2.7%, and was 4% during the first half of 2017. The main factor behind the growth was domestic consumer demand, accompanied by a neutral or negative impact of investments; moreover, the GDP growth was also slightly influenced by an increase in net exports. During the first half of 2017 exports (in EUR terms) went up by 8.4%, and imports by 10.9%. The trade with the Central and Eastern European countries increased. Between January and June 2017, exports to the European Union rose by 7.3%, and at the same time exports to the Central and Eastern European countries went up by 24%. When comparing the the rate of increase in trade, one should keep in mind that the trading volume of the Central and Eastern European countries is small compared with EU member states. 

 

In 2016 investments dropped by 11.8%, but the fall was observed both in investments in the sector of enterprises and in the government sector. In the first half of 2017 the expected rise in investment output was not recorded; preliminary data indicate that the biggest companies were cutting investments as they were waiting for lasting stability of the economy. There is no information yet about the scale of the rise in investments in the government sector.

 

Positive tendencies have been reinforced on the labour market. In 2017 average employment in the sector of enterprises was 4.3% higher than last year, and the rate of registered unemployment reached 7.1% at the end of June. Large discrepancies between provinces should be stressed, for instance the unemployment rate totalled 4.2% in Greater Poland Province, and as much as 12,1% in Warmia-Masuria Province.

 

Price indicators for goods and services went up after many-months deflation. As the average inflation during the first half of 2017 totalled 1.9%, the strongest rise was recorded in the case of food (3.7%) and transport (7%) prices. Inflation also changed the ratio between real and nominal wages. In 2016 the nominal wage went up by 3.8%, and the real wage was 4.4% higher. In the first half of 2017 a rise of 5% in the average nominalwage and of 3% in the real wage was recorded in the sector of enterprises.

 

 

2017 9 10 1

Legend: Basic indicators in the economy in the first half of 2017, changes in % Source: Central Statistical Office’s data 

 

 

2017 9 10 2

 Legend: GDP in EU member states, a percentage of the preceding year Source: Central Statistical Office, data from EUROSTAT database

 

 

Basic indicators illustrating the economic situation

2017 9 58 1

Source: Central Statistical Office’s data *investments in the enterprise sector

 

 

Construction

 

The value of the construction market was assessed at PLN 171.3 billion in 2016, and it had been the lowest since 2011. In 2014-2015, accompanied by strong fluctuations, the construction output rose by about 3%. A dramatic slump took place in 2016 when the construction output dropped by 14%.

 

 

2017 9 10 4

Legend: Value of construction market, in billion zlotys
Source: Central Statistical Office, Construction - performance

 

 

The first half of 2017 shows an increase of 7.6% in the marketed production attained by companies employing >9 people (compared to the very low level recorded last year) . Both the investment construction and renovations went up; output increased in all types of construction. However, it is commonly believed that a significant and stable increase in construction can be expected in 2018 at the earliest if no new threats appear.

 

 

(...)

 

2017 9 10 5

Legend: Changes in construction output in the first half of 2016 and 2017, in %
Source: Central Statistical Office’s data

 

 

Worrying economic situation in construction. Exceeding 4% in 2016, the net rate of return let us hope that a systematic rise could be expected in that field. The first half of 2017 was a huge surprise. It is true that the beginning of year is always weak, but the falling rates of return in general and specialist construction and losses recorded by civil engineering companies showed that there were more and more insolvent construction companies.

 

 

Basic indicators for construction

2017 9 59 1

 

Central Statistical Office: Statistical Bulletins

 

 

Acceleration expected in residential construction. 163.4 thou flats were completed in 2016, which was 10.8% more than a year before, but the high level of residential construction recorded in 2008 had not been attained yet. 78.3 thou flats were completed in the first half of 2017, i.e. 6.1% more than last year. A rise was recorded both in private housing and in housing for sale or rent (erected by property developers).

 

 

2017 9 11 3

Legend: Completed dwellings, in thou

 

 

Increases in the number of flats the construction of which has started (of nearly 25%) and in the number of building permits issued (of a third) herald a possibility that the expected rise in the number of flats constructed will in fact take place. The recently started scheme “flat+” (“mieszkanie+) is mainly addressed to low- income households. The scheme will adopt solutions reducing the construction cost of flats. An important factor reducing the construction cost of flats is the transfer of plots from resources belonging to state authorities free of charge (or at a low price). However, what should be taken into account is the fact that the location of a number of those plots does not ensure necessary infrastructure, which in turn will lead to additional expenditure. The first results of the “flat+” scheme are awaited at the beginning of 2018. In the past residential government-support programmes addressed to “the young” were realised on many occasions, but their effects were modest. It is expected that the “flat+” programme will be a concept meeting expectations.

 

The second area of construction which all eyes are upon is road infrastructure construction. In the case of infrastructure construction, the preferred field is the construction of motorways and dual carriageways. The scheme, co-financed with UE funds, has been realised for years. However, unfortunately, it has been accompanied by various delays; additionally, the construction costs have also been exceeded. According to the current plans the length of clearways is to reach in the end 7,650 km, comprising 2,000 km of motorways and 5,650 km of dual carriageways. According to Wikipedia (data of July 2017) the following motorways and dual carriageways are already completed or still under construction:

 

Motorways. There are 1,660.6 km of already completed sections of motorways. If we add to that sections under construction and under tender procedures, and the sections with one roadway and those covered by decisions on environmental conditions (DŚU), then the total length of motorways will soon reach the target set.

 

Dual carriageways. The tasks seem to be at a less advanced level in the case of dual carriageways. So far 1,599 km of sections of dual carriageways have been completed. If we add to that sections still under construction (1,022.5 km) and under tender procedures (567.7 km), sections with a single roadway and those covered by decisions on environmental conditions (DŚU), then, after the accomplishment of all present plans, the total length of dual carriageways will reach 4,493.6 km, i.e. approx. 80% of the target.

 

 

2017 9 11 4

Legend: Motorways and dual carriageways, in km
Source: WIKIPEDIA – July 2017
*/Motorways and dual carriageways in total: 1/ sections under construction and under tender procedure 2/ sections with a single roadway and covered by DŚU

 

 

When assessing the prospects of an increase in construction, one cannot forget to mention the business climate. According to the research (of June 2017) the general business atmosphere in construction was at +6.4 (last month +2.5). 20.5% of companies signalled an improvement in the economic situation, and 14.1% claimed that it deteriorated. The forecasts for the order book of production and assembly output have been positive for the first time for months.

 

 

Positive changes in industry

 

The total industrial marketed production in 2016 went up by 3.1%, which was a worse result than in the preceding years. An improvement was recorded in the first half of 2017, when the rise was 5.7%; industrial processing recorded even a higher rate (6.2%). High figures were also observed in the case of manufacturers of machines and tools, cars, metals and metal products, plastic, mineral materials for construction and glass industry.

 

 

2017 9 12 1

Legend: Industrial marketed production, in %
Source: Central Statistical Office’s data

 

 

With the diversified tendencies in industrial processing, it must be clearly noted that the glass industry is among the fields with the highest output. Both in 2016 and in the first half of 2017 the glass industry output dynamically rose. The share of glass and glassware in the mineral material industry systematically increased. The same can be said about the manufacturing of the most important glassware. Indeed, goods made of various materials appear on the market (e.g. those made of plastic) that have the potential to substitute glass in a number of applications, yet glass continues to be the material most appreciated by users: especially preferred products are the modern ones made of glass. The output of cast and rolled glass dropped; on the other hand, the production of float glass, single- and multiple-glazed units, and multilayer safety glass with dimensions and shape adjusted for building in rose.

 

About a 9% increase was recorded in the case of float glass, coated and polished glass in sheets in 2016. The rise in the output of multiple-glazed units totalled 10%, and over a 3% incline was observed in the case of single-glazed unit production. Household glassware was at a slightly lower level than a year ago.

 

In the structure of the glass industry output the highest share (of over 56%) is made up by profiled flat glass and glass subject to further treatment; traditional cast and rolled glass does not exceed 11%. The share of household glassware (glasses, stemware, bottles, tableware or kitchenware) in the total output of the industry is 1/4; the remaining types of glassware are: glass fibre, technical glass, and laboratory glassware for pharmacy. Compared with previous years the share of household glassware dropped; what went up is the share of modern types of profiled glass. The rise in the output of modern flat glass results from a growing share of high-rising residential construction and public facilities.

 

 

2017 9 12 2

Legend: Structure of glass industry in 2016; blue – flat profiled, red – traditional cast and rolled glass, green – household glass, yellow - others
Source: WIKIPEDIA – July 2017

 

 

2017 9 12 3

Legend: Rise in the output of industrial processing and glass industry, in %
Source: Central Statistical Office, Industry input and output

 

 

Industrial production in total and in the glass

2017 9 60 1

Source: Central Statistical Office Statistical Bulletins,

Production of industrial goods. Industry input and output 1/ data for plants > 49 people; moreover, small plants provide 2-6% of total yearly flat glass output and about 1/4 of household glassware production

 

 

When assessing the tendencies of changes in the glass industry, one should pay attention to the fact that the rise in the glass and glassware marketed production was higher than the rise recorded in the processing industry, and also higher than the one in construction mineral materials. The observation refers to the period from 2015 to 2017, when the value of glass and glassware marketed production systematically went up.

 

Net rates of return are quite positive in the industry. The net rate of return in the case of industrial processing in 2016, reaching 5.2%, was higher than a year before, when it was calculated to be 4.7%. In the first half of 2017, the net rate of return was 5.4%; all industries were economically viable. In some cases the rate of return reached as much as 10%, e.g. in the production of pharmaceutical products, paper industry, transport equipment, chemical products and also in the glass industry.

 

The glass industry is among those with a high rate of return. The rate of return in the glass industry has been high for many years. Main factors influencing the rate of return generated by companies producing glass and glassware are the volume and cost-effectiveness of exportation. Additionally, prices on the domestic market and falling costs impact that rate too. Structural changes ensuring an increase in production in conditions of a beneficial economic situation are triggered by a high share of exports in the glass industry marketed production. When evaluating the situation in the glass industry, one should stress that the sector is characterised by favourable market indices; the financial condition is good and stable, and the stability of export relations is a security against fluctuations in the domestic demand.

 

 

2017 9 12 5

Legend: Net rate of return in industrial processing (green) and glass industry (blue), in %
Source: Central Statistical Office, Industry input and output 

 

 

Exports

 

Polish exports in total in 2016 reached EUR 184.8 billion, and was 2.9% higher than in the previous year; positive foreign trade balance was at EUR 3.9 billion in 2016. In the first half of 2017, when 8.4% growth was recorded, exports reached EUR 99.1 billion.

 

Germany was the largest recipient of Polish exported goods; its share in Polish exports exceeded 27%. Other countries, constituting a significant share in Polish exports, were United Kingdom, Czech Republic, France, Italy, and the Netherlands. Countries in the Central and Eastern Europe contribute to an increase in Polish exports, but their share is small, compared with the EU.

 

Polish companies are recognised and highly rated exporters of glassware in European markets. Exports is a contributing factor to the development of the glass industry and it speeds up the rate of increase in production. The year 2016 was advantageous for glass exporters; the total of exported glass industry products reached EUR 1,650 million, which was nearly 6% more than last year. Glass industry exports varied depending on the assortment: a higher rate of increase was attained in the exports of different types of profiled flat glass than in the exports of household glassware. The average prices on European markets varied; between 2013-2016 the prices of household glassware were subject to slight fluctuations, but the prices of modern flat glassware went up by a quarter.

 

 

Exports in 2013-2016

2017 9 61 1

Source: Central Statistical Office, Exports and imports

 

 

 2017 9 13 2

Legend: Glass and glassware exports, in million euros
Source: Central Statistical Office, Foreign trade

 

 

Conclusions

 

The results attained in the first half of 2017 were positive in many fields of economy, e.g. there was an increase in industrial production, construction output, and retail trade, companies’ financial situation improved, and unemployment fell. However, lasting and beneficial changes should rely on investments, which has already been heralded but not realised yet. The forthcoming months may witness multi-directional changes triggered by both negative and positive effects of economic policy pursued by the government. Yet, what should be noticed is the business opinion survey data in which companies assess their opportunities higher than in the previous months. Economic growth in the next quarters will depend on political conditions and companies’ investment-oriented actions, among others. If that was favourable, it would result in an improvement in the private and public investment market, continuation of already increasing private consumption and net exports.

 

An important factor contributing to structural changes and ensuring an increase in production is a high share of exports in the marketed production. The glass industry is characterised by positive economic factors: its market position is firm. The strength of export relations can be perceived as a guarantee against fluctuation on the domestic market.

 

 

 

prof. Zofia Bolkowska

 

 

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