Economic performance
The second half of the year brought a certain weakening of business activity, with the result that GDP
growth for the year as a whole stood at 5.0 per cent. One of the prime factors at work in slowing down growth was
the slacker increase in demand seen in the final months of the year, principally in external demand. This situation
was primarily the indirect effect of turmoil on global financial markets, and particularly of the Russian crisis, which
caused a grave collapse in Polish exports to especially Russia and Ukraine.
As a result of the difficult situation in the export sector the trade balance deficit increased by USD 3 213mn
compared to the previous year to a deficit amounted to USD 14 228mn. Exports increased by USD 2 847mn, while
imports increased by USD 6 060mn. The current account deficit rose from USD 4 268mn in 1997 to USD 6 858mn
in 1998. The shortfall on the current balance indicates that the aggregate growth in domestic demand was higher
than the growth in GDP.
There was a significant increase in FDI, which totalled USD 5 129mn. This trend suffered a major
disruption as a result of the Russian crisis in August. Foreign direct investors continued to view the Polish economy
as stable and offering sound growth prospects. The industries receiving the most FDI were the financial sector and
the car industry. One of the factors encouraging investment in the banking industry was that it was seen as a very
good bridgehead for gaining a strong position on the Polish pension fund mar ket. This year both Fiat and
Volkswagen established their own banks in Poland to finance purchases of their cars. The largest investments in the
car industry were Fiat and Daewoo, both undertook capital expenditure in the course of 1998 to prepare the
production of new models of vehicles.
Even with a growth in GDP by 5.0 per cent, where private consumption also rose by 4.8 per cent and
private investments rose by 14.2 per cent, the unemployment at the year end had risen to 1 831 000 people or 10.4
per cent.
The ratio of the fiscal deficit to GDP came to around 2.4 per cent this year against 2.7 per cent in 1997 and
3.4 per cent in 1996.