Inflation in Poland could rise in September, says finance minister
Poland is grappling with price growth that has surged t o it s highest level in a quarter of a cent ur y combined wit h a slowdown
Inflation in Poland could rise slightly in September, the country’s finance minister said on Saturday, adding that she still believed it would reach a peak this year.
Poland is grappling with price growth that has surged to its highest level in a quarter of a century combined with a slowdown. Some economists say that it could tip the largest economy in the European Union’s eastern wing into recession.
“We forecast that in September there could be growth in inflation to around 16.4 per cent,” Magdalena Rzeczkowska told private broadcaster RMF FM.
In August, inflation was 16.1 per cent, according to statistics office data.
“I still hope that the highest point of inflation will be this year... at the end of next year inflation should start to fall,” she said.
Rzeczkowska also said that Poland would not enter a recession, but that it would certainly see an economic slowdown.
Inflation will remain at a high level in the coming months but it should soon start declining owing to a drop in the annualised growth of energy prices, said Adam Glapieski, governor of the National Bank of Poland (NBP).
G la pie ski made the statement at a press conference, which followed the central bank’s decision to raise the main interest rate by 25 basis points, to 6.75 per cent, in a bid to batle record-high inflation, which reached 16.1 per cent in August.
“We estimate that the contribution of energy prices to inflation was 5.9 percentage points in August and that of food was 4.6 percentage points ,” he said and added that inflation is still growing, but at a slower pace than before. According to Glapieski, the summer likely saw a turning point in inflation readings.
“As far as inflation alone is concerned, and just like the NBP said earlier, the summer was probably a turning point for Poland’s inflation, the inflation peak, this is this plateau, it may go up a bit, down bit, and then inflation will gradually decline,” he said.
The central bank head admited that economic activity had been showing signs of a slowdown, but according to him the condition of the economy is still very good, and there is no recession threat.
“A number of countries are likely to see a recession, but Poland is not,” he said.
According to Glapieski, Poland’s inflation has a chance to decline to about 7 per cent during 2023 and to go down to 3 per cent at the end of 2023 provided that the government maintains the current anti-inflation package of tax cuts, and regulated prices are let intact.
“But most probably this is impossible, because (the government - PAP) would have to find huge amounts (of money to finance it - PAP),” Glapieski concluded. The NBP head also hinted that the central bank may start cuting interest rates in the middle or at the end of 2023.
The inflation rate in August reached 16.1 per cent year-on-year in Poland, unexpectedly accelerating from 15.6 per cent in July, with economists having forecast price growth to have begun slowing down.
“Ouch,” tweeted analysts at mbank in response to the figure, which they pointed out contradicted the forecasters’ consensus of a slowdown in inflation and mbank’s own forecast of a stabilisation. They noted that price growth had been driven mainly by rising energy and food costs, which went up 3.7 per cent and 1.6 per cent month on month respectively. However, core inflation – which excludes volatile prices such as food and energy – may also have exceeded 10 per cent in August.
“We are now more inclined to look for a peak in food prices in 2023,” they added. “By the end of the year, inflation will not go below 16 per cent.”
The new figure, which comes from a flash estimate by Statistics Poland (GUS), a state agency, means that inflation has reached another 25-year high in Poland. It is also the highest reading for
August among the European countries that have already published data for this month.
Analysts at Pekao, another bank, had forecast inflation of 15.4 per cent, 0.2 percentage points lower than in July. BO[ Bank had predicted a figure of 15.5 per cent, while Credit Agricole foresaw inflation falling to 15.2 per cent.
“We’re still picking our jaws off the floor, but it looks like all the major categories surprised upwards,” said Marcin Luzieski, an economist with Santander Bank Polski, quoted by financial news service Bankier.pl.
He noted that the big rise in energy costs – which was the largest such month-on-month growth this year – might have been influenced by the price of coal, which risks being in shortage this winter.
Of the 10 European countries that have already published August inflation data, price increases in Poland were by far the fastest. Slovenia and Spain are second and third, with inflation rates of 11 per cent and 10.4 per cent respectively, according to data published on Trading Economics website.
One of the reasons why prices in Poland have risen faster than in other European countries is the weakening of the zloty against the euro and the dollar, as well as dependence on imports of energy resources, mainly coal, oil and gas, which have become significantly more expensive in recent months.