Poland Pursues ‘Middle Path’ With Covid Response to Save Economy

(Bloomberg) -- Poland was among the first in Europe to impose border and shopping restrictions in the spring, but as the coronavirus pandemic returns even stronger in October the government is lagging peers in reintroducing measures that could hit the economy.

The European Union’s largest eastern economy registered a record 8,099 new cases of coronavirus infections on Thursday, up from 4,280 a week ago. With the health-care system increasingly strained, investors have started selling the zloty amid concern that the government may be forced into a new lockdown.

While France introduced curfews for cities including Paris and the Czech Republic pledged to build field hospitals to help deal with the flood of Covid-19 patients, the Polish government announced plans to limit the number of people in stores as well as force universities and high schools to work online in the worst-hit areas.

Key Insights

• “We’re seeking a middle path” in responding to Covid to protect people without hobbling the economy with a “full lockdown,” Prime Minister Mateusz Morawiecki said on Thursday. Poland was keen on keeping Covid numbers low in the spring, ahead of a presidential ballot that was slated for May but ultimately delayed until July by the pandemic.
• “Negative market sentiment is rising on concerns Poland will need to follow Czechs and impose more restrictions to gain control of Covid-19,” said Piotr Matys, a London-based currency strategist at Rabobank. The zloty slipped 0.9% against the euro on Thursday to the weakest level this month.
• Even if new restrictions will be less damaging than in the spring, “consumers and enterprises will cut their spending due to uncertainty,” MBank SA economists, led by Marcin Mazurek, wrote in a research note. “We maintain our 2020 forecasts, but black clouds are gathering over 2021.”
• Quantitative easing has curbed the sovereign’s borrowing costs, with the yield on Poland’s two-year local-currency note near a record low of 0.02% Thursday.

Further Reading

• London, Paris Face Clampdowns With Europe Hitting Virus Records
• Virus Spike Keeps Polish Interest Rates Locked Near Zero
• Citi Says Short the Zloty as East Europe Mood Turns Bearish

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