News Analysis: Polish economy may suffer from Russian embargo on fruits, vegetables: economists
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E-mail Xinhua, August 9, 2014
According to the Polish economists, the Russian embargo introduced recently on Polish fruits and vegetables will most probably reduce the growth of Polish GDP by 0.3-0.4 percentage points. It might also result in the oversupply of food production and decreasing of the inflation.
Russia introduced a temporary embargo banning the import of most of Polish fruits and vegetables on August, 1st. It included Polish production of fresh pears, cherries, plums, cabbage, cauliflower, but is mostly hit the apple production market.
As an explanation, the Russian Federal Service for Veterinary and Phytosanitary Surveillance of the Russian Federation (Rosselkhoznadzor) informed, that the embargo is a result of violating Russian and international phytosanitary requirements by the Polish products entering the country. Soon afterwards however, on Thursday, August 7th, Russia has also introduced embargo on the products of the countries that had introduced anti-Russia sanction before.
Another important factor unfavorable for the Polish producers is the fact, that Russia forbade the entrance of Polish pork after some cases of African swine flu have been discovered within the territory of Poland.
All in all, the total loss associated with the embargo on pork, vegetables, fruit and others for Poland will reach nearly 850 million euro (1.14 billion U.S. dollars) and it covers almost 10 percent of Polish export to Russia.
Polish government has undertaken a series of actions aimed at helping the Polish farmers and orchard owners in the aggravating situation. Most importantly, the Polish government has turned to the European Union on Friday, August 8th seeking for compensation for Polish apple producers, as Poland is the bigger apple exporter in the world. The initial proposals are to be presented next week.
The Poles launched the #jedzjablka (#eatapples) Twitter campaign on Thursday, a day after Russia banned most imports of fruit and vegetables from Poland. Politicians, celebrities, journalists and other members of the Polish Twitter joined the campaign against Russia by tweeting photos of themselves taking a bite out of an apple. Polish government is also working on a law allowing the advertising of cider, a kind of light alcohol which is made of apples.
Apart from taking steps to ease the burden of Polish farmers, some experts start to analyze the possible consequences of Russian embargo on the Polish economy situation.
According to the ING Bank Slaski, one of the Polish banks economists, Rafal Benecki, an important factor is that not only does the embargo afflict Polish production, but also it does cover other European Union countries, which makes it impossible to sell Polish products to Russia through any other foreign channel. As a result - he points out - Poland would have to deal with the decreased GDP growth, and decreased inflation, due to the food production oversupply.
He underlines that embargo is extremely painful in the apple export domain, because its export amount if relatively even with the domestic consumption. Taking into account this relation, the embargo would cause more distress for Poland that it would for Germany, because there would be a need to look for new export markets, for example in Asia or Africa, which would not be easy.
The mBank economist Marek Ignaszak said that it is hard to predict the scale of reduction of Polish GDP growth at the moment. According to his assessments, it will most probably around 0.6 to 1 percent. Another result which is almost sure to happen is a decline of food prices in Poland.
Some other economist emphasize that Poland might not only be directly influenced by the Russian embargo, but it might also be vulnerable to Russian recession or the German economic slowdown. BNP Paribas economist, Michal Dybula's calculation is that the Polish economic growth might be 0.4 percent lower; while next year it will be even 0.8 percent less.
Finally, Citi Bank Handlowy economists believe that the Russian embargo on Polish import of fruit and vegetables, and EU sanctions against Russia may reduce the growth of Polish GDP by 0.3-0.4 percentage points. According to them, the direct influence of Russian sanctions on the Polish economy should be limited.
In the previous year, the value of fruit and vegetables export to Russia was about 0.6 billion dollars, which is only 0.4 percent of total Polish export, or less than 0.2 percent of Polish GDP.
It can be assumed that due to the introduction of the embargo, Polish companies will try to find new markets and sell their products to the Russian market via third countries. In the short term it is impossible to avoid negative consequences, but the direct net effect of the embargo will probably be lower than the aforementioned 0.2 percent of the GDP.
As another way of counteracting against Russian sanctions, Poland is currently striving for the so-called "fast track' to obtain approval for the export of Polish apples to the United States. The U.S. does not allow apples from the EU enter its market, except for Italy. Apart from phytosanitary reasons, most important cause is to protect its own production. The Polish ambassador in Washington, Ryszard Schnepf said on Saturday he has already attended a meeting with U.S. Vice-Minister of Agriculture, Michael Scus, dedicated to discuss the matter. Endit
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