BMI View: E conomic recovery and growth over the forecast period will directly benefit the retail sector. Reducing unemployment, a swelling middle class and substantial growth in household incomes will provide for improving levels of disposable income that will benefit retailers through higher levels of spending in the market. While Warsaw and medium sized cities offer the greatest rewards for retailers , there will be a noticeable shift in opportunities to wards more rural areas as competition in the larger markets in tensif y.
Household spending, which was growing consistently in 2013-2014, is going to post a slump in 2015 in terms of US dollar. Appreciation of US dollar will be the main determinant of the 12.7% projected decline of household expenditures in 2015. Meanwhile, in zloty terms, there will be heavy growth of 3.6%, faster than in 2013-2014. This indicates a large real gain, since inflation is projected to amount to only 0.8% at the end of this year. The Polish economy retains a rapid growth rate, with its real GDP expected to expand by 3.5% this year, causing positive developments across the country. Unemployment continues to decline, making more households independent of social welfare, wages are growing and consumer confidence is improving. The country remained relatively intact after Russia's counter-sanctions late in 2014, which were initially forecast to hurt Poland's economy and especially its agricultural sector. With a constant flow of foreign direct investments and rising entrepreneurship within the country, more businesses are creating employment and fuelling the economic growth.
The positive developments are highly likely to extend into the forecast period. We forecast that the growth of real GDP will exceed 3.5% annually for every year in 2016-2019 providing a strong backbone for further development of the retail industry. Warsaw is likely to emerge as a central destination for retail investments. The construction of new retail areas and expansion of the existing shopping centres will diversify the supply of retail area and will likely drive down the rent costs. JLL reports that 108,000 sq m of new retail area were in the pipeline, a significant addition to the capital's current pool of 1.1mn sq m. The new development will benefit from the growing demand: total household spending will maintain an average annual growth rate of 6.1% for 2016-2019. As zloty rebounds, the growth in US dollar terms will be even more impressive with a CAGR of 9.9% for the same period as imports become more affordable.
Poland's role in Central and Eastern Europe is gradually going to become more relevant. First, Poland started taking a more active role in the geopolitical arena after the election of new president. With a more confrontational position, Poland will be exposed to more economic and security risks coming from the east. However, the developments in 2014 and after showed that the country's economy is resilient despite the Russian pressure. Secondly, economic growth and demographic shifts will give Poland a stronger voice in the decision making of the European Union. A rapid, more than 3.5% annually, real output growth for 2016-2019 will narrow down the income gap between Western European countries and Poland. While the country will have to contribute more to the EU budget and receive less funding, it is on track to become one of the most important European retail markets. With the sixth largest population in the EU, Poland will become the central location in Eastern Europe for retailers across all industry sub-sectors.
Poland's retail sector grew less than expected in September. Retail sales expanded by .1%, down from 0.5% the month before and significantly less than economists estimates of 1.6%.
Two major regulatory changes have come into force in Poland through 2015 and will have a significant impact on consumer lending. These acts, named the recommendation of Polish Financial Supervion Authority and recommendation U, increased the obligatory consumer deposit to 10% of a loans value and now provide customers the choice of alternative external insurance policies than that provided by their banks.
The Law and Justice party secured victory in the Polish elections in October 2015. With the party expected to continue to back EU integration but pursuing a greater level of control over its own development and direction the regulatory environment or retaielrs may become more difficult to operate in as policy is adjusted to reflect the party's agends.
The introduction of controlled foreign companies (CFC) rules imposes a 19% corpoarte tax on Polish tax payers and has been designed to guard against tax basae erosion. Consequently retailers will have to pay higher levels of taxation and the tax system has become more ownerous for companies.
Key BMI Forecasts
The zloty and dollar values of household spending will diverge over the period due to fluctuations in the currency and the strengthening of the dollar, resulting in 3.6% growth locally and a 12.7% contraction in dollar terms.
Net income per household will grow from USD13,841 to USD19,223 between 2015 and 2019, partly due to rebounding zloty and partly due to rising employment and wages underscoring an expansion of the retail market.
Food & non-alcoholic drinks spending will see its share of total household spending decline by 0.7% while health spending and personal, insurance and other will be the biggest gainers over 2015-2019.
The Poland Retail Report has been researched at source and features BMI Research's independent assessment and forecasts for the retail sector. The report examines key drivers of retail sales growth and future prospects, including consumer spending and private sector investment.
BMI's Poland Retail Report also examines the level of development and potential for growth of the retail sector, the commercial initiatives of major players, changing consumer demographics that influence demand and the regulatory environment. Key sub-sectors include mass grocery retail, autos, over-the-counter pharmaceuticals, computers and consumer electronics.
- Benchmark BMI's independent retail industry forecasts for Poland to test other views - a key input for successful budgeting and strategic business planning in the Polish retail market.
- Target business opportunities and risks in Poland through our reviews of latest industry trends, regulatory changes and major deals, projects and investments.
BMI Industry View
Summary of BMI’s key forecasts and industry analysis, plus a discussion of major industry developments and a snapshot of key short-term demand-driving macroeconomic movements.
Industry SWOT Analysis
Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the retail sector and within the broader political, economic and business environment.
BMI Industry Forecasts
There are four separate 5-year forecast modules in the retail reports. These are:
- Headline Retail Forecast: Total household spending (local currency and USDbn, % growth, % GDP, per capita, per household), spending by retail sector (food & non-alcoholic drink, alcoholic drink, clothing & footwear, housing & utilities, furnishings & home, health, transport, recreation, education, restaurants & hotels, personal care & insurance (local currency and USDbn, % growth, % GDP, % of total spending)
- Retail Sector Forecast: Breakdown of Food, Non Alcoholic Drink, Alcohol, Tobacco, Clothing, Footwear, Household Goods, Furnishings, Appliances, Glass and Tablewear, Household Textiles, Consumer Electronics, Garden Toys and Pets, Home and Garden tools, Personal Care, Personal Effects Spending (USDbn, % Growth)
- Household Income and Numbers Forecast: Number of Households (‘000, % growth); gross income per household and per capita; net income per household and per capita; tax and social contributions per capita; breakdown of household incomes – USD5000+, USD10,000+ USD50000+ (‘000, % of total); labour force, employment and unemployment (‘000, % change)
- Demographic Forecast: Total population; Babies 0-12 months; Young Children 0-4yrs; Children 5-9yrs; Young Teens and Older Children 10-14yrs; Older Teens 15-19yrs; Adults 21yrs +; Young Adults 21-29yrs; Middle Aged 40-64yrs (‘000, % growth, male, female); Urban Population (‘000, % population); Rural Population (‘000, % population).
BMI’s Retail Risk Reward Index
BMI’s Risk Reward Indices provide investors looking for opportunities in the region with a clear country comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
Provides a detailed country-specific analysis of the key trends and developments in the retail sector as a whole, as well as an assessment of the main drivers affecting the major retail segments including mass grocery retail, fashion, pharmacies, consumer electronics, home improvement and personal care. The market overview also considers the most effective store formats in a given country and the impact of these factors on the main international and domestic players’ development strategies.
This provides a brief overview of the key players in each subsection of the retail sector including MGR, Fashion, Home Improvement, Consumer Electronics, Pharmacies, and Department Store chains.
The Retail Reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.