Is the zloty on steroids?

100 zlote

Back in December I raved about how low the GBP was to the PLN, at that time it was standing at around 4.99 zloty to the pound. We’re now in April and the zloty has strengthened such that the rate to the pound is around 4.2, the dollar at 2.2 and the euro at 3.4. I can’t help wondering where this will end and what the mix between tears and joy will be?

I won’t attempt to come over all economist on you but this significant change in the value of the zloty and the fact that it keeps getting stronger has some interesting effects at a personal level.

On the plus side. Any bills I have to pay in foreign currency are getting cheaper. I have a few regulars in both pounds and dollars and the savings are significant. Not to mention any internet shopping outside of Poland, also cheaper. Going on trips back to the UK, cheaper. Holiday in Spain later this year, mixed feelings. Spending money will be cheaper but you have to wonder if booking the thing (and paying deposit) in February was such a good idea? These things are priced in euro so for sure it’s costing me more than it could have done as the euro is sinking and I think my price in zloty is fixed. Another problemette, I want to convert some cash zlote into euro and pounds for spending money soon. Do I do it now while it’s 3.4 & 4.2 or do I wait? Which way are the euro and pound going to go between now and July/August I wonder?

Having seen how this year is going – here’s a tip for you, if you’re a gambling man. Book this year’s holiday ‘last minute’. I have a feeling the credit crunch is going to rip the arse out of the holiday market, luxury discretional spending, there’s going to be a mountain of holidays being sold off cheap this year and they may not even wait until the last minute to drop the prices.

One of the biggest plus sides to the strong zlote is this, and let this be a warning for every professional currently employed in Warsaw and paid in zloty. I got a mail from a guy who works for our company in Newcastle, UK. He wants to move on, get a bit of excitement, see the world, expand his horizons by coming out to central Europe. He’s talked to his boss, he’s talked to HR and when nothing much happened he mailed me direct to see if there are any opportunities. He’s a well educated guy with a good looking CV, the sort of person who would be very employable in the UK. I have wanted to get one more Brit into my team for years now, someone exactly like this guy, not for the reasons you might all jump to but for solid business reasons that there’s not enough time to get into. Just accept my word that this is not me employing a Brit because I like Brits better than Poles and yes, he can be effective without Polish language because of the high number of clients we have who are international and also the amount of cross border work we do. Anyway, in the past I would either not have bothered pursuing it or would have been told “no” by my boss on the basis that “ex-pats are too expensive”, or something.

Nevertheless, not being one to shy away from the right decision, I decided that I would actively chase this opportunity and had a few chats with the guy. Right from the off I laid my cards on the table – “Yes, this is a good move for you. Yes, I want you in my team (subject to….etc) but NO, there’s no ex-pat nonsense and I’ll pay you what I have already budgeted to pay a Pole to do the same job.”. My budget was based on actual salaries expected by Polish project managers (building surveyors) in Warsaw and has been substantiated by a further round of interviews from which I hope to employ another two Poles for exactly the same salary I offered Mr Newcastle. “Get your calculator out and divide this number by 4.4, I said”. He did and to my utter amazement he said very enthusiastically, “Yes, that sounds great!”. Now I’m wondering if I’m actually overpaying the guy!! Seriously though, the two worlds are now aligned – I can fish in the UK employment market and find good quality talent for the same price, in some cases even less, than I can employ often rather average staff in Warsaw. I’m shocked and a lot of people should be worried! They now cost the same as western Europeans, so no more rationalisation of poor performance by looking at the salary.

This works both ways of course and is one of the possible downsides of the FX movement. My salary is going through the roof! Obviously, for a pure Polish company it would be stable as I have had no pay rise but for a company who’s fees have been (until now) largely in euros and who’s European accounting is done in London (and therefore in pounds) anything priced in zlote is getting to be very expensive. Me included. We’re now on a push to get all fees into zloty, I’ve been trying to do that for a while anyway but it’s not so easy. This rate roller-coaster also makes negotiating with US clients a whole lot of fun. Had one last week who was insisting that the companies “metrics” suggest the price should be X USD per square metre. My price was higher and trying to close the gap, at a rate of 2.2, is pretty tough going!

Another interesting factor is all those “ex-pats” who are paid in something other than zloty. I was given this choice when I joined but have never really seen the point, nor been worried about the zloy, so was comfortable being paid in PLN. It seems that many others in town did not share my optimism and have been getting paid in pounds or euros. They have all seen their salaries dropping at an alarming rate and something like a small revolution has been going on back-stage with shouts of “We want zloty!!” being heard in the conference rooms of Warsaw.

Even shopping has taken on a new dimension. I needed to buy a new suit the other week after my only good one got torn to shreds on a Moscow building site a while back. I’m used to paying between 800 – 1,200 PLN for suit in Warsaw. Good enough for me, quality and price somewhere in the middle. This time I found myself thinking “That’s over 200 quid for suit (at 4.4)! Holy crap, I could fly to the UK buy a good suit and fly back for less money!”. Yes. Shopping is now making my brain ache. In the end I did one of my normal shopping “guerilla raids” in Marks & Spencer and picked up two suits for under 900 PLN. Nice one!

So, the strong zloty can be good or bad, or both at the same time but the main question is when is it going to stabilise or is it going to keep going and then fall off a cliff?

PS – I was going to title this “Are you a kantor does that say 4.2?”, but decided against it. ;)

By the way, you might want to exchange more currency at 20 East.

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10 thoughts on “Is the zloty on steroids?

  1. Kinuk says:

    I don’t know WHAT IS going on, but it’s amazing to watch. Each week I check the exchange rate expecting the rate to even out and each week I’m amazed to see the pound drop even further. When we arrived, the exchange was 7 zlots to 1 GBP. What a difference 4 years make.

    A couple of years back, we were converted to PLN against the wishes of most of the staff. The exchange rate we were given was ok, but not great (not 7 zlots for every pound). At the time, the pound was more stable, stronger and seemed the better currency so there was much whingeing on staff. Now, most of my colleagues are chuffed to bits about getting paid in zloty.

    I just wonder how much longer the zloty will remain at this high. Surely it’ll slump down again eventually. Won’t it?

  2. michael farris says:

    I’ve heard that the currency is being jiggered to make the transition to the Euro easier (increasing prices as much as possible before joining the Euro zone).

    I’m too illiterate in terms of economics to know if that makes any sense.

  3. Datblog says:

    On a personal level I changed enough euros and dollars to PLN a year back so as not to worry for a while, thanks to some sage advice from a former colleague.

    On a professional level the Government are getting worried, and so they should – Poland is becoming expensive on the international market making exports less attractive and of course imports more attractive – adding further burden to the imbalance (read debt!) – don’t be surprised if interest rates continue to grow!!

    Michael makes a good point vis-a-vis the euro transition, but the finance ministry have just lost there smartest advisor and until they get a replacement they will make a mess of this. (I know one likely candidate and hope he accepts then the situation should abate).

    Trade imbalance is a major concern and a strong zloty could ruin what Poland was building….

  4. scatts says:

    I suppose the “former” in “former colleague” means I’ll not be getting any sage advice about between now and August then! :(

    I overlooked the interest rate thing. I wonder if this could lead to Poland’s own little house price crash as people who have maxed on mortgages start to fall by the wayside as the monthly costs rise?

    Mind you. I suppose for those who took mortgages in Swiss or Euros are quids in at the moment?

  5. Datblog says:

    I still think of ‘colleague’ as someone I work(ed) with – a difference from friend, so my former (work) colleague is now a friend as we no longer work together. He still offers sage advice!!

    The best advice I can give is buy/sell when you are happy, don’t be greedy – sure you might always make an extra 3 or 5 % but on 5000 PLN is it worth holding out (I know that people’s fortunes are different and to some 5% on 5K is a lot but….). Don’t be greedy buy when you think it is right for you and don’t procrastinate, nor should you regret…..If I had to exchange 10000 PLN to euro this year I would do it it soon, If I was to change 1 million PLN to euro I would wait and have a real time feed to my computer/blackberry – so how much is it worth to you?

  6. Jakotakowski says:

    But what can we expect in the following months? What is causing this? Is there an answer to this question? Or is it just 42?

  7. scatts says:

    Jakotakowski, good question. The answer might be 4.2 but is unlikely to be 42!

    I did speak to other ‘experts’ including the head of FX at a major international bank in Warsaw. The advice seems to be to expect rates to keep heading in the same direction, perhaps more slowly though. There was no sense of shock at where the rates are as Poland has “good fundamentals” (whatever that means!) and because Poland wants to join the Euro.

    I’m not bothering to exchange anything until I need to, or until there is a strong shift of rates against the advice I’ve been given.

  8. Bogusz says:

    Today I heard the Euro will drop to 2.50 PLN in august this year. That was what my wife heard on Polish tv.
    We’ve seen a lot of dropping each year in the holiday season but this is really somthing else….

  9. scatts says:

    Holy cheap Euro batman!

    That would certainly help with the holiday spending money, as long as it happens before the 20something of August.

    I suppose the idea is to sink down to 1-1 and then just say “Bollocks! Let’s just print Euros from now on.”. I noticed that the main Polish money printer (mint?) is already certified for Euro anyway so it should be an easy switch.

    Should be interesting to experience one’s salary being converted from Zlots to Euro, as and when that happens.

  10. […] Is the zloty on steroids? …this significant change in the value of the zloty and the fact that it keeps getting stronger has some interesting effects at a personal level. […]

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