see you later We have 13.9 percent in May, the most in 24 years, but that’s not the maximum price growth that lies ahead. Experts assume that the peak of inflation is before us, including experts from the Polish Economic Institute (PIE), a public think tank, who have presented their latest economic forecasts.
Inflation will increase further
According to PIE, inflation In June and July it will exceed 14 per cent and will reach its highest level in August when it will be 15.8 per cent. The average for this year is expected to reach 13.2%. It will not be the next double-digit number, but it is still high – economists from the PIE expected an average annual indicator of 8.6%, although in the odd months at the beginning of 2023 we will see more than 14%.
These forecasts assume that they will continue to function less value added tax Excise duties under the so-called anti-inflation shields (food, fuel and energy). The Polish Economic Institute expects that the government will abolish the shields only in 2024. After that, this move will raise the price index by about 2.5 percentage points. The inflation rate is expected to reach 4.5%. This is much lower than it is today, but still clearly above the target inflation measure NBP (2.5%) and upper the border Deviations from this target (3.5%).
We will return to what the Central Bank of Poland can do, for now we will look at rates from the PIE forecast. By the time inflation begins to decline, it will continue to spread widely. up to 70 percent. Prices are expected to rise this year by more than 5 percent. Food and energy prices are rising particularly markedly. In the next two years, food is expected to rise more than 10 percent, mostly in the case of grain and meat products, as a result of the Russian war in Ukraine. Drought, which will lead to lower yields, may increase food prices in Europe. The issue of fertilizer availability and prices can also reduce the yield – Russia is the world’s largest exporter of nitrogen fertilizers, Belarus is potassium fertilizers, and both countries are affected by Western sanctions.
In the case of energy, there is no good news either. “The chances of a decline in energy commodity prices on world markets are slim,” PIE experts wrote in their analysis. In their opinion, crude oil prices will stabilize around 105 dollar per barrel (currently close to $120). This, combined with the effects of the war in Ukraine, means higher fuel prices. But gas would also be expensive – and more expensive -. The Polish Economic Institute expects “high” increases in gas tariffs, which have been approved by the Energy Regulatory Office.
And not only food and energy prices (that is, the most volatile ones) are rising, but also core inflation, which, although it will decrease, will remain at a high level. Here the prices of industrial goods may rise, and services may rise less.
How far will the MPC raise interest rates so far?
What about the activities of the Polish Central Bank? PIE expects the headline rate in Poland to eventually rise to 6.5 percent in this cycle. This means that the MPC will raise interest rates Again, in July, by 50 basis points. In their view, it is possible that the effect of weakening consumption, and increasing inflation, has had and will continue to affect previous interest rate increases. For example, signals from the credit market may indicate this – the number of people willing to take out mortgages has fallen by half.
According to PIE economists, more aggressive monetary policy tightening (i.e. raising interest rates) could have a negative impact on mortgage repayments (not yet shown). Of course, it is not that the situation cannot change. In the fall and winter, we are likely to see the impact of higher energy costs on homes (heating and energy electrical, Gas). There is no MPC decision meeting in August anyway.
If NBP decides to end its rate-raising cycle soon (which Adam Glapiński suggested during its recent press conference), it will do so at an interesting time. The world’s major central banks are just getting started, or even just getting started. And today, Wednesday, June 15th, the rates are weighted The US Federal Reserve will raise, much more than expected a week agoBefore we get worse-than-expected inflation data in the US. Also, the European Central Bank will begin its rate hike cycle in July (the key rate is now negative there).
GDP will grow decently this year, and it will be slower next year
The Polish Economic Institute also predicts that in 2022 the Polish economy will grow by 4.8%. Not bad, given the more bleak forecasts that emerged immediately after the outbreak of the war in Ukraine. It turned out, PIE notes, that the industry was doing better than expected, and there was additional demand due to the influx of Ukrainian refugees. It was and will appear in the data for the first two quarters of this year, and the next two will be weaker. Demand will decrease, and what will pay 8.5 percent. Growth in the first three months of this year – the company’s stocks.
Next year Gross domestic product Poland’s growth rate is expected to grow by 3.5%. Then we will also see a positive effect on investments of money from the national reconstruction plan – it will add about one percentage point to economic growth.
The future outlook for the labor market is sweet and bitter. It’s great for some employees, because according to PIE, this year’s salaries will increase by an average of 13.2 percent. (i.e. basically similar to consumer prices), and next year by about 10.1 percent. (And the average annual inflation rate – let’s remember 8.6%). There is also still a shortage of employees, so employers are willing to fight for them at higher wages. Newcomers from Ukraine will not provide much help here – most of them are currently women with children, which will only reduce wage pressure in certain industries. Experts from the Polish Economic Institute wrote: “The scale of the shortage is currently one of the highest compared to other EU countries, which leads to the consolidation of the spiral of wage inflation.” In their view, we could see double-digit wage increases until the middle of next year.
In short: according to the Polish Economic Institute, we will see a slowdown in the economy, although it will not be deep. On the other hand, prices will continue to rise, especially for food and energy, but not only. Wage pressure from the labor market will also increase it.
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