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NBP has bad news for the government. The worst case scenario is coming

NBP has bad news for the government.  The worst case scenario is coming

NBP sent a shocking signal to the government. Stagflation is approaching

Unfortunately, every new data from Poland’s real economy confirms these concerns. appearances that Prime Minister called his time economic turmoil And later during the Impact Conference in Poznan, he developed creatively – saying On “destroying the foundations of the global economy” They are entering our daily reality more and more brutally.

talking about The phenomenon of full-scale stagflation, i.e. a combination of very low economic growth or stagnation with high inflation at the same time. We note the latest release of this one of the darkest economic scenarios thanks to data provided by the National Bank of Poland. what is going on?

Inflation is still rising. There is not even an iota of hope in sight

According to NBP calculations, core inflation accelerated to 7.7% in April. On an annual basis (on an annual basis). By excluding more volatile components, such as food and energy prices, core inflation shows much better pressure on price increases caused by domestic factors than classic CPI (consumer inflation)Which Every month we record on pages (last reading is 12.4 percent)

As noted by Pekao Bank economists, in relation to the previous month, core inflation registered a very high 1.3% increase. “In April, all measures of core inflation were going up. So far there are no indications that inflationary pressure is abating.” Summarize the bank’s specialists.

This does not mean anything good for the prices in our country. Inflation takes deeper and deeper roots It extends to the entire market for services and goods.

Inflation in April is like a stain on the wall. Possible peak in the third quarter of 2022

This is also confirmed by the data from the Central Statistical Office, which we got acquainted with last Friday. The April reading was the highest since May 1998 and for 13 months remained well above the upper limit of deviations from the NBP inflation target (3.5% yoy). In 12 months, fuel prices are up 27.8 percent. They were defeated minimally by the increase in energy prices (27.3%). It’s not that bad with food, but it’s a 13.2 percent increase. So it affects everyone.

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Eye-catching ones include Big increase in meat prices. Within a year, poultry increased by almost half, and only in the last month – by 14.4 percent. Beef prices jumped in one month by 6.4 percent, and in a year by about 30 percent. In the case of pork, the proportion is 12.1 percent and 15.6 percent, respectively.

Bitter sugar reading. In one month, its price increased by 8.8 percent, compared to April 2021 – by exactly 35 percent. About 25 percent more than a year, you have to pay for the flour, the bread, and the butter. From year to year the cost increases at a multiple rate:

In short, it doesn’t look good. Economists, including those in the European Union, expect inflation to peak during the summer holidays. It’s about the beginning of the second and third quarter of this yearBut there is no point in expecting a rapid drop in prices. exactly the contrary.

The economists at Credit Agricole, for example, predict that The overall inflation rate will be 12.4%. On an annual basis in 2022 and 7.4 percent in 2023

We expect inflation to peak in June at 14.3%. In our scenario, we assumed that the term of the anti-inflation shield would extend to the end of 2023. If the shield expires earlier (in August 2022 or January 2023), then according to our estimates, inflation will exceed 16%. In the summer of 2022 It will be about 9 percent. Annual average in 2023. We believe that the government will want to avoid embodying such a scenario, given the parliamentary elections scheduled for 2023, as its latest report reads.

declining GDP growth

The rest of the article is below the video

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And that’s part of it. The MPC wants to curb demand by raising prices in order to combat increases in goods and services. Theoretically, the Poles are supposed to spend less and save more, which will pull money out of sales, stabilizing prices. The problem is Since we have written more than once in, the government is working in the opposite direction and adding money to the market. By doing so, the United Right sends more pro-inflation drivers, which are in line with the high inflation scenario at least until 2025. This year the government is assuming the deficit will rise to 4.3% and drop to 3.7% after that year. However, the European Commission believes that the hole in our country’s public finances will deepen and we will close in 2023 with a deficit of 4.4%. The price increase will have little fuel.

progressive disparities

but that is not all. We also have another two month problem – Our economy is becoming increasingly unstable. We see it in the current account balance.

For clarity, the current account measures all inflows and outflows related to foreign transactions by Polish residents. These are the income and expenses related, for example, to foreign trade and the payment of dividends and interest on investments And various transfers, for example, money from Brussels. If there is a surplus in the current account, it means that a country earns more than it spends in relation to foreign countries, and if – on the contrary – more money flows in than it affects Polish accounts. Most often, the deficit is increased by the growth of imports (of products and services). From here the problem begins.

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March current account balance (C/A) -3 billion euros and It was the lowest monthly reading since mid-2011 and the lowest for March since comparable data was available (2004). Exports increased by 16.2 percent. x/o vs. deceleration to nearly 10 per cent. rdr in february. It surprised imports, which increased by 34.3 percent. on an annualized basis versus 20.2 percent rdr in February.

According to the NBP statement, similar to the previous months, the factor limiting exports is the decline in sales of cars and their spare parts, while the increase in imports is supported by higher prices of raw materials, especially energy commodities. NBP also drew attention to the negative impact of the war in Ukraine and sanctions against Russia and Belarus on the value of Polish exports, which have fallen to their lowest levels in at least 22 years.

Little economic melting rays

to summarise, Rising inflation, growing current account deficit and projected increase in fiscal deficit – contradict the NBP chief’s assurances from the April conference The emergence of growing macroeconomic imbalances in the Polish economy. A situation has arisen from which there is no easy way out. Part of the government is responsible for this, the other part is the epidemic and the war.

However, there is a truism in all of this that we can explain with optimism The thing about economic cycles is that better times come after lean years. Even after the worst storm in years, we’ll finally see small rays of economic thaw.

Damian Szymański, . journalist

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