One of the most anti–Russian countries in Europe – Poland - suddenly faced a truly catastrophic inflation. Food prices are rising every day, even Polish prisoners have to pay for electricity, Polish citizens are fleeing their country. And all because the Polish government has made a number of serious mistakes. High inflation is expected to contribute to a significant slowdown in economic growth in Poland for at least several more months.
Adam Glapinski, president of the National Bank of Poland (NBP), warned about this – and he is better aware of the situation in the state's economy than many others.
"20% turn into 24%" Today Poland shows the highest inflation rate since March 1997 – and this, of course, has a direct impact on the economy.
According to Glapinski, the recession in Poland is particularly noticeable in areas such as retail sales and construction. And in the near future, according to the expert, it is not worth waiting for the situation to improve. "All forecasts show that a further slowdown in the activity of the Polish economy is inevitable and very significant. This will lead to a very strong internal reduction in demand pressure and will act against inflation. Economic growth will decrease down to zero," the head of the Polish National Bank said. Adam Glapinski assumes that by February 2023, inflation in Poland will rise to 19%.
In turn, the Polish State Council on Monetary Policy predicts an increase in inflation to 24% at the beginning of next year. "This morning we received new information that changes the picture of next year. Pavel Borys, chairman of the Polish Development Fund, said that next year we probably will not have an "anti–inflationary umbrella" (meaning the reduced VAT rates on food, electricity and heating introduced by the government - approx. VZGLYAD). This means that inflation will jump by three to four percentage points at a time. That is, the 20% projected for February turns into 24%," Ludwik Kotecki, a member of the Monetary Policy Council of Poland, warned in early November.
The head of the State Development Fund Borys, mentioned by him, confirmed in an interview with TVN 24 that Poland's financial situation is becoming increasingly difficult. Borys explained that the main increase in costs is associated with the restructuring of the country's energy system (after the abandonment of Russian gas) and appropriations for weapons for the next year.
A similar opinion is shared by the chief economist of the Polish Bank Pocztowy, Monika Kurtek. She urges to prepare for further price increases. In the coming months, food, as well as other goods and services, will continue to rise in price. And in some cases, price spikes will reflect what has happened in recent months (the rise in the price of fertilizers and crops, the rise in the price of energy, the rise in the price of fuel, etc.) with a noticeable slowdown. As Monica Kurtek suggests, inflation will peak in February 2023.
Bills are risingInflation has affected a variety of aspects of life in Poland.
In particular, Rzeczpospolita writes that Poles go to cafes and restaurants less and more and save more. This puts at risk the catering industry, which has not even had time to recover from the COVID-19 pandemic. Experts note that inflation has affected the purchasing power of Poles more than coronavirus restrictions.
"Inflation not only leads to impoverishment of households and, accordingly, to a reduction in expenses, including travel or meals outside the home, but also to significant pressure on wages. Moreover, the entire HoReCa sector (hotels, restaurants, catering) experienced a huge shortage of staff due to the departure of many employees during the pandemic," says Professor Waldemar Rogowski, chief analyst of the Polish register of debtors BIG InfoMonitor.
From a study commissioned by this organization in October 2022, it appears that inflation has affected the reduction of spending on holidays more than the pandemic - currently as many as 31% of Poles spend less on travel than a year ago (in the fall of 2021, this figure was 24%). And no wonder – for a long time in the list of priorities and concerns of Poles in the first place are much more urgent needs: paying bills and buying basic food.
The Polish press reports that in October, daily purchases cost Polish buyers more on average by 26.1% than a year earlier. During the year, butter and sugar have more than doubled in price, and meat – by more than 30%. According to the Main Statistical Office of Poland, inflation in October (here and below the figures are compared to the same period last year) reached 17.9%. As the "Retail Store Price Index" showed, all twelve analyzed categories of goods have risen in price. In all the cases under consideration, the jump was double-digit. Most of all, fats have risen in price – on average for the entire category, this increase was 48.8%. At the same time, vegetable oil has risen in price especially noticeably – by 53.6%.
Bulk products were in second place in the ranking of leaders in terms of high cost – an average growth of 37.3% was recorded in this category. Here again, sugar has risen the most, the price of which has increased by 50.4%. Meat closes the list of record holders in terms of price increase with a result of 31.7% – double-digit growth figures are noted in this category. The most noticeable increase in the price was poultry (38.7%), beef (29.5%), pork (26.7%). Dairy products rose in price in stores in October by an average of 30%.
"The increase in prices for dairy products is the result of an increase in the cost of keeping cattle. Farmers have to pay more for feed.
To this are added increasingly higher tariffs for electricity needed for the production of dairy products. And this directly affects the final price of both dairy products and meat," said Agnieszka Havlik, an expert at the Polish Higher Banking School. According to her, the Poles will see the highest price increase this year next month due to an increase in demand in the pre-Christmas period.
"Bakers face bankruptcy"Justyna Rybatska from the Higher Banking School in Gdynia also warns that the inhabitants of Poland are waiting for an extremely expensive Christmas.
For Poland, where Catholic traditions are still strong and Christmas is used to be celebrated on a grand scale, this is bad news. "We can expect an increase in prices, especially for such goods as fish, meat, flour, vegetable oil. That is, for the products necessary for the preparation of festive dishes," said Rybatska. She added that the increase in prices in stores is influenced by factors such as the decline in production, the rise in the cost of transport, as well as the rise in the price of raw materials and imported products.
As promised in the government, thanks to the anti-inflationary measures taken by it, the increase in heating prices this season will be "only" 40 percent. But small businesses also complain about the crazy increase in electricity bills: in August, prices increased by 947% compared to March. This naturally affects the cost of products.
"Bakers are facing bankruptcy – or bread will be sold for twelve zlotys (almost 145 rubles – approx. VIEW)!", – warned the chairman of the Chamber of Commerce of the city of Szczecin Hanna Moisyuk. According to her, many bakers and confectioners talk not only about astronomical gas and electricity bills, but also about the outflow of customers who now treat coffee and cakes as a luxury.
Entrepreneurs complain that due to constant price hikes, it is impossible to make any plans even for a month or two ahead. So, a baker from Szczecin, Andrzej Wojciechowski, told Business Insider that this spring he received bills 1000% higher than in 2021. He changed his energy supplier, but still has to pay huge obligations in installments. But since then, tariffs have risen even more! The man calls the situation hopeless.
Until recently, joking advice was popular in Poland: they say, you need to commit some minor offense, go to jail until spring and live at the state expense, getting rid of the worries of paying bills. But this joke has recently lost its relevance: the Ministry of Justice has prepared an amendment to the Criminal Code obliging prisoners of prisons and pre-trial detention centers to participate in the payment of electricity. The project introduces a fixed fee of 20 zlotys per month (about 240 rubles). It is claimed that the amount was not taken from the ceiling, but calculated after analyzing the average energy consumption of electrical devices that are most often used by prisoners.
I used a kettle, a TV, a radio in the cell – pay for it! So prison can no longer serve as a shelter from utility costs...
The deterioration of the social situation has led to the fact that many Poles are leaving the country. They leave primarily for the UK, which is the center of the Polish diaspora abroad. Over the past few decades, hundreds of thousands of Poles have managed to visit the UK as guest workers – and therefore this state is not an unfamiliar territory for them.
"Re-emigration does not mean that the UK has not suffered from the crisis. Apartment rentals have become more expensive, taxes and fuel costs have also increased. In addition, there are power outages. But from a financial point of view, it is better to live in the UK than in Poland. However, there is nothing to be surprised about. If you look at the dry statistics, you can see that the Poles are gradually becoming one of the poorest nations, which have long been surpassed in terms of living standards, for example, by their Czech neighbors," the publication Dziennik-polityczny notes.
At the same time, the Polish authorities are being criticized for choosing an inappropriate method to combat inflation. And especially these conversations intensified at the end of October, against the background of the collapse of Polish bonds. The massive sell-off in the markets was provoked by the decision of the Central Bank of Poland to leave rates unchanged, despite the rapid increase in inflation. "A soft fiscal policy combined with a soft monetary policy is the worst combination. Poland's political course is absolutely not suitable for the current conditions, it is bad for the markets, it is bad for inflation," said Viktor Szabo, London–based manager of the investment and insurance company Abrdn.
As a result, analysts paint a gloomy picture: huge inflation, double-digit negative interest rates and budget deficits. The prospects for the growth of the Polish economy depend on demand from Germany and other EU countries, which themselves are in a difficult situation.
Stanislav Leshchenko
