Zloty economics: Crisis? What crisis?

WARSAW, Poland — Maria Bninska is breathing a sigh of relief as Poland’s zloty continues its upward climb against leading foreign currencies after coming perilously close to collapsing a little more than a year ago.

The reason is that, like thousands of other Poles, Bninska holds a mortgage denominated in Swiss francs.

It seemed like a good idea when she took out her loan, said the Warsaw office worker, explaining that the interest rate on a Swiss franc mortgage is significantly lower than on one in the local currency, because the Polish central bank’s rates are much higher than those imposed by the Swiss.

However, the sense of that strategy unraveled in late 2008, when the world was shaken by the collapse of Lehman Brothers. The failure of the investment bank sent investors scurrying from emerging markets like Poland. As they dumped the zloty, the currency began to swoon, falling from 3.20 to the euro in the summer of 2008 to 4.90 to the euro in February 2009.

The currency’s weakening made Bninska’s monthly rates soar, as it took more and more zlotys to buy the francs needed to make her payment. “I was really worried for a while,” she said.

But as the economy has begun to stabilize, Poland’s currency, like the currencies of other European emerging markets, has significantly strengthened. The zloty now trades for about 3.83 to the euro, and most analysts predict that the zloty will continue to appreciate.

“My payments are finally coming down again,” said Bninska.

However, the relief felt by her and other mortgage holders is not shared by Polish exporters, who were a key force in preventing the Polish economy from falling into recession last year. Poland was the only European Union economy to grow in 2009, clocking in an expansion of 1.7 percent.

Leszek Waliszewski, the owner of FA Krosno, a car parts maker located in eastern Poland, says the cheap zloty was one of the main factors that allowed him to save his company at a time when the automaking industry was in deep crisis.

“Last year was pretty dramatic,” he said. “Despite the crisis we were still profitable, and the weaker zloty certainly helped us because we were more competitive. We were able to replace foreign suppliers to some local plants because their parts — priced in euros — had become too expensive, and we got new foreign markets because the zloty made us cheaper in the rest of Europe.”

But the good times are now coming to an end. “Anything below 4 zlotys to the euro is a problem for us,” he said.

The odds are that Waliszewski’s mood will continue to darken this year, as Poland becomes one of Europe’s investment safe havens. The reason, paradoxically, is the current crisis sweeping through Greece, Portugal and the other weaker members of the eurozone. Now, instead of fleeing ex-communist emerging markets, investors are increasingly wary about buying the debt of countries that a year ago seemed rock solid.

“In one sense we are the beneficiaries of this turmoil,” said Dominik Radziwill, Poland’s deputy finance minister. “We have become an alternative for investors who are looking at the periphery of Europe. We can see increasing interest in investing in Polish debt from foreign investors.”

The currency’s strength has prompted a change of tack from the central bank; just a few months ago it was worried about the weakening trend slipping out of control, which could have endangered the banking system as businesses and consumers with foreign currency exposure were driven into bankruptcy. But now the bank is sending signals that it may delay raising interest rates to keep the zloty weaker.

But just as no one predicted the zloty’s fall, and few foresaw its subsequent rise, the currency’s future is murky. Adding to the uncertainty is Radziwill, who feels that the current strengthening trend may have run its course.

“Now the factors that strengthened the zloty may be weakened. We could even imagine a reversal of the trend,” he said.

That kind of uncertainty makes companies want to tear out their hair. They would prefer a stable exchange rate, rather than the wild gyrations of the last year.

“These swings create enormous problems for us,” said Mateusz Figaszewski, spokesman for Solaris, a bus maker located near the central Polish city of Poznan. “We really simply want Poland to join the euro so that this uncertainty can end.”