Poland's Miracle Growth Predicted to Slow  

In 2009, when all other countries in Central and Eastern Europe went through deep recessions, Poland shone as a beacon of success.

Castle Square in Warsaw old town, 30th July 2010. (Photo by Luis Davilla/Cover/Getty Images)
Luis Davilla
Castle Square in Warsaw old town, 30th July 2010. (Photo by Luis Davilla/Cover/Getty Images)

Its economy grew by 1.6 percent in 2009, according to Eurostat data, picking up by 3.8 percent in 2010. It's forecast to advance by 4 percent this year.

However, forecasts for future growth suggest this pace will slow. Analysts at ING have cut their growth forecasts for Poland as well as for the whole region, while UniCredit analysts recently slashed their growth estimates to 4 percent for this year from 4.4 percent previously, and to 3.1 percent for next year from 3.9 percent.

A large part of Poland's miracle growth during the crisis was due to fiscal stimulus in the form of tax cuts and money pumped into the economy in 2009 by the government, said Gyula Toth, head of EEMEA FI/FX Strategy at UniCredit.

He believes Polish growth "is definitely going to slow," as that stimulus cannot be repeated because the country's debt has increased.

Poland faces parliamentary elections on Oct. 9, but any new government will have to show restraint in spending public money, analysts said.

The ruling Civic Platform is ahead in opinion polls but it looks like it will need a coalition partner.

Investors will be looking out for how the new cabinet adheres to the fiscal tightening path promised by the current government, UniCredit analysts wrote in a market note.

"The stated aim for next year is that the budget deficit will be below 3 percent, which will be very challenging given the overly optimistic macro assumptions of the current Cabinet – and the looming economic slowdown," the analysts added.

"The rating agencies have made it clear that if there isn't a credible fiscal consolidation plan after the election, they will eventually downgrade," said Simon Quijano-Evans, EMEA chief economist at ING.

"Any government will have to be cautious with the fiscal position," he added.

By law, if public debt hits 55 percent of gross domestic product (GDP), the government must balance the budget next year. Poland's constitution forbids borrowing if public debt reaches 60 percent of GDP, the limit considered sustainable in the euro zone according to the Maastricht Treaty, although many euro zone economies including France and Germany have bigger debt ratios.

Eastern Europe - A CNBC Special Report
Eastern Europe - A CNBC Special Report

The country is building stadiums and infrastructure ahead of the UEFA soccer tournament, which it is co-hosting with Ukraine next year. ING analysts wrote in a research note that "public investment should support growth...but after that the government's hands will be tied by necessary fiscal tightening."

Polish unemployment is 9.4 percent, according to the latest Eurostat data. Germany and Austria opened their labor markets to Polish citizens in May; many Poles, who obtained the right to work in the UK as soon as their country joined the European Union in 2004, have emigrated to Britain in search of better wages.