Poland headed for an accounting disaster? Imports underestimated, no Euro entry

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Edited by: Moderator Mar 26, 11, 20:06 #1

25th March 2011

Reports of major discrepancies in Poland's official economic data have raised questions about the true picture of economic health.

“We have a problem. In the balance of payments, in the errors and omissions category, a huge number appeared, reaching four percent of GDP. If this is caused by underestimated imports, the trade and services deficit is bigger and therefore the current account deficit is also bigger,” Mr Gronicki said.

“Such a situation would cause financial investors to change how they view Polish instruments, and secondly, would impact GDP estimates. Underestimated imports means GDP is overestimated, with all the consequences related,” he added.

http://www.wbj.pl/article-53840-poland-headed-for-an-accounting-disast er.html?typ=ise

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Edited by: SeanBM Mar 26, 11, 20:11 #2

in his opinion the discrepancies are unlikely to be attributable to imports to the extent that they will significantly affect GDP figures.

“Therefore, I don't really think we will have a scenario where the GDP figures are reviewed and we cross the 55 percent threshold, which would in turn trigger drastic cuts,” he added.

You keep editing.

Sounds like muchadoabout nothing if you read the last few sentences.

BBmanThreads: - Posts: 459 Joined: Jan 4, 11 ♂	Mar 26, 11, 21:03 #3
I heard about this on a business news program i watch. Some people in the business community think that many eastern european countries are cheating on their accounting to hide their countries economic problems. They also speculated that greece used to do the same until they adopted the euro and therefore could no longer hide any crisis. No idea how true any of this is.

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Edited by: AdamKadmon Mar 26, 11, 22:31 #4

Joseph Stiglitz - Problems with GDP as an Economic Barometer

Some of what we are doing now is reflection of bad accounting. So more generally, information affects behaviour; so, how we describe success affects what we strive for. If GDP is what we think is success, people will strive for GDP. And political leaders all the time say: look what I have done, I’ve succeeded in getting economy to grow at 6%, but what he did, is to get how to figured it out; so that's part of a political rhetoric. By doing that they focus policies on things that will increase GDP. But GDP is often not a good measure of economic performance and societal well-being. GDP does not tell you about what happens to the typical citizen and this is growing problem, because when you have growing inequality in a society, you can have GDP going up, but most of society going worse off. In developing countries that may be growing by cutting down their force, but when they cut down their force, it’s nothing there, so growth is unsustainable. GDP tells you nothing about sustainability.

itchyballs

Mar 27, 11, 03:45 #5

BBman:

Quote

I heard about this on a business news program i watch. Some people in the business community think that many eastern european countries are cheating on their accounting to hide their countries economic problems. They also speculated that greece used to do the same until they adopted the euro and therefore could no longer hide any crisis. No idea how true any of this is.

Poland may be playing this up as a ploy to get out of the Euro. They would be nuts to give up the zloty. They had to notice what happened to Ireland.

peterwegThreads: 35 Posts: 1,989 Joined: Feb 16, 07 ♂	Mar 27, 11, 16:36 #6
SeanBM: You keep editing. Sounds like muchadoabout nothing if you read the last few sentences. What are you talking about? I didn't edit anything. Did the mods edit something or did the article change. Its not 'nothing', its potentially a very serious problem.

delphiandomineThreads: 42 Posts: 9,954 Joined: Nov 25, 08 ♂ [Suspended]	Mar 27, 11, 16:51 #7
itchyballs: They would be nuts to give up the zloty. Nuts? Do you know how much trouble is caused for importers with the Euro? In business terms, a lot is done in Euro/Swiss Franc anyway.

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Edited by: peterweg Mar 27, 11, 17:42 #8

delphiandomine:

Nuts?

Do you know how much trouble is caused for importers with the Euro?

Its has upsides and downside. The up is Import/exporters and trade with Germany would be improved and increased.

The downsides are loss of control over the economy (possibly not such an issue if Poland s economy is utterly dependant on the Euro's biggest economy). Major downside is price inflation (rounding up of prices) and possible loss of competitiveness (more of a Lazy Latin country issue, I hope)

Edit: biggest gain is property owners of course. Low interest and attractiveness for Euro investors.

WroclawThreads: 77 Posts: 7,404 Joined: Apr 1, 06 ♂ [Moderator]	Mar 27, 11, 18:47 #9
peterweg: What are you talking about? I didn't edit anything. Did the mods edit something or did the article change. the first post was edited. then SeanBM made a comment, but the first post was then edited a second time.

itchyballs	Mar 28, 11, 04:57 #10
delphiandomine: Do you know how much trouble is caused for importers with the Euro? This is the computer age. The German banks control the Euro.

convexThreads: 46 Posts: 7,185 Joined: Nov 25, 09 ♂	Mar 28, 11, 05:33 #11
delphiandomine: Do you know how much trouble is caused for importers with the Euro? importers hedge against currency fluctuation.

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Edited by: Grzegorz_ Mar 28, 11, 13:01 #12

peterweg:

oland headed for an accounting disaster? Imports underestimated

Poland is a mess and It's getting worse each year, Tusk and his clowns are ruining this country, we've got 8% of GDP budget deficit and no realistic plan to reduce it, taxes are going up, bureaucracy is a huge problem and It's getting worse, in rankings of conditions for business we are behind many 3rd world countries, what's worst, we were made nig*ers in our own country, banks and most companies were sold to foreigners, what really matters is not value of good and services produced in Poland but how much local people get out of it, not much really, unless huge changes are made, I don't see Poland ever getting even close to EU average, It will be good If the whole damn thing don't collaps totally, however I don't think GUS is faking statistics... looks like the controversy arose over Poland and Germany reporting much different trade balances with each other, that's due to different methodologies of foreign trade calculations in these countries. For example If goods from China goes to Germany and next to Poland, Gerries classify It as import from China and export to Poland, Poland classify It as import from China, so then the size of export to Poland reported by Germany doesn't add up to the size of import from Germany reported by Poland. Oy vey !

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Edited by: hague1cmaeron Mar 28, 11, 13:50 #13

Grzegorz_:

8% of GDP budget deficit and no realistic plan to reduce it, taxes are going up

Well obviously....lifting taxes is one way of paying down the debt, which BTW is still a lot smaller than other European nations+VAT on pre-processed foods has actually gone down.

Other deficit reduction measures, or measures aimed at improving the balance sheet so to speak....include the recent pension changes by limiting the % amount put into OFE. A good way of tackling the problem without unnecessary pain. I bet you would have complained if they stated cutting public services.

Besides given the relatively underdeveloped state of Poland's infrastructure, this means that it would be quite stupid to suddenly halt spending at all costs to bring down debt. Government spending which is usually matched by EU funds needs to be spent in a certain time period, and it wouldn't be wise for Poland to forgo its opportunity to develop. Besides the money invested in infrastructure creates jobs-stops unemployment from going up, and boosts medium and long term economic growth.

Ultimately it's the economic growth rate, which seems to be going into the upswing phase of economic growth-which is likely to return to boom levels, that will eliminate the debt.

Grzegorz_:

e were made nig*ers in our own country, banks and most companies were sold to foreigners, what really matters is not value of good and services produced in Poland but how much local people get out of it

Sounds like silly 30s nationalism to me, Poland should take investment from wherever it can. Many countries would kill to get the type of foreign investment Poland enjoys. And ultimately no single company is guaranteed perpetual existence and freedom from competition.

Grzegorz_:

I don't see Poland ever getting even close to EU average

Trust me it will happen sooner than you think, I would give it a maximum of 20 years. Although I think it is more likely to be about 15. Even within the next 5 years Poland will be quite a different country from the one it is now-and I mean that is a positive sense, provided it maintains its present course.

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Apr 2, 11, 12:59 #14

hague1cmaeron:

include the recent pension changes by limiting the % amount put into OFE. A good way of tackling the problem without unnecessary pain.

Go read what Krzysztof Rybiński or even Balcerowicz are talking about it.

hague1cmaeron:

I bet you would have complained if they stated cutting public services.

I would have been more than happy.

hague1cmaeron:

Sounds like silly 30s nationalism to me

Not at all. Green field foreign investment in manufacturing or services are a great thing (especially If they are high-tech/knowledge based ane export oriented) but selling for pennies domestic market oriented companies to foreign entities is at best idiotic and that's what happened in Poland.

hague1cmaeron:

Trust me it will happen sooner than you think, I would give it a maximum of 20 years. Although I think it is more likely to be about 15.

Fascinating. Please post the reasons behind that optimism.

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Apr 2, 11, 13:22 #15

Grzegorz_:

Fascinating. Please post the reasons behind that optimism.

There was an article going around by either the World Bank or some other entity that predicted that in 20 years time based on current projections of an average growth rate of some 4.5%-which was Poland's rate of growth for the previous 10 years, Poland will get there and catch up with Germany.

In my opinion that is a conservative estimate, I believe it is likely to be closer to 5%. My personal prediction would be 4.8%, that is why I moved the timescale down by some 5 years.

Polonius3Threads: 1,005 Posts: 4,833 Joined: Apr 11, 08 ♂	Apr 2, 11, 13:24 #16
Should Poland join the euro zone and go down with it or sit back and wait for the euro to collapse? When that happens, I wonder if the countreis will revert to their orginal currencies or, in some cases, come up with new ones.

hague1cmaeronThreads: 21 Posts: 1,649 Joined: Mar 30, 10 ♂	Edited by: hague1cmaeron Apr 2, 11, 13:32 #17
They should sit tight and wait out the storm, If the storm blows over and the Euro remains intact, they should join in 2013 at the earliest. In the meantime they should try to reap the benefits of competitively priced exports, that however is not a long term solution to economic prosperity.

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Apr 2, 11, 14:14 #18

hague1cmaeron:

predicted that in 20 years time based on current projections of an average growth rate of some 4.5%-which was Poland's rate of growth for the previous 10 years, Poland will get there and catch up with Germany.

Really ? That methodology of prediction is worth nothing even by elementary school standards.

hague1cmaeron:

In my opinion that is a conservative estimate, I believe it is likely to be closer to 5%.

Please list the reasons behind that optimism.

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Edited by: hague1cmaeron Apr 4, 11, 12:45 #19

Grzegorz_:

Really ? That methodology of prediction is worth nothing even by elementary school standards.

Economics is not a science smart ass, inaccuracy is part parcel of economics, and the fact that people get paid to make these PREDICTIONS means that is more valuable than you condescending reply would suggest.

In your case I think it is more to do with defeatism.

Grzegorz_:

Please list the reasons behind that optimism.

With pleasure, in recent years the government has underestimated the rate growth by a good percentage point. Some EU and international bodies have underestimated the rate by a good 2 percentage points! I expect the trend to continue.

I will make another bold prediction, most economic institutions, including the Polish government are predicting a rate of 4% this year, I predict that it will be 5%-if not higher.

So come back to this thread when the year is out.

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