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Inflation, interest rates and economic growth in Poland. PKO BP economists’ forecasts

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Inflation in Poland will remain above 10 percent until mid-2023, according to the forecasts of PKO Bank Polski economists. In their opinion, we will still have an interest rate hike in September – by 50 basis points. Economic growth is expected to decline from 4.9 percent in 2022 to 1.3 percent in 2023.

At the end of June this year. The “Economic Quarterly”, prepared by the Bank’s Macroeconomic Analysis Team, has been published on the website of PKO BP. The report presents the situation in the second quarter of 2022, and also includes forecasts for the coming months.

As we read, there are signs of economic downturn in the domestic economy. According to the forecasts of PKO BP economists, the dynamics of the Gross Domestic Product (GDP) will decline to 4.9 percent in 2022 and 1.3 percent in 2023. For comparison, in 2021, economic growth in Poland amounted to 5.9 percent.

According to the report, in the first quarter of 2023, we may witness a contraction of the Polish economy. As we read, GDP in the period from January to March next year may drop by 0.9 percent.

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Inflation in Poland

Economists of the largest bank in Poland emphasized that the effects of Russian aggression against Ukraine brought a marked strengthening of the upward trend inflation in the period April-June. “From March to May, CPI inflation rose by an average of over 3 percent MoM and 1.8 pp YoY,” they indicated. From the introductory ones data of the Central Statistical Office shows that inflation in June this year. was 15.6 percent year on year. Final data on last month’s price increases will be released on Friday, July 15th.

The representatives of PKO BP indicated that the outbreak of the war significantly intensified the upward trend in the prices of food, energy and fuels, which – according to their estimates – had jointly boosted CPI inflation by nearly 5 percentage points since February.


As we read in the “Economic Quarterly”, the pro-inflationary effects of Russian aggression raise the inflation forecasts for 2022-2023. In the baseline scenario, assuming the expiry of the shields at the end of 2022, PKO BP economists forecast that CPI inflation will remain above 10 percent until mid-2023. At the same time, it was emphasized that accurate forecasts, even in the horizon of several months, are subject to great uncertainty.

PKO BP forecasts show that in the third quarter of this year. The increase in prices will average 14.8 percent year on year, and in the last three months of the year it will drop to 13.3 percent. In the first quarter of 2023, annual CPI inflation is expected to return to nearly 15 percent. According to economists’ forecasts, it will average 14.7 percent during this period. In the second quarter, inflation, in turn, is expected to fall to 9.8 percent.

Economists expect the average annual price index for goods and services in 2022 to be 13.3 percent and 8.4 percent in 2023.

Interest rates in Poland

PKO BP economists indicated that in the second quarter of this year. The Monetary Policy Council “clearly increased the scale of monetary policy tightening”. During these three months only NBP interest rates rose by 250 basis points, the reference rate rose to 6.00 percent. “The current cycle of rate hikes is the fastest and largest since the adoption of the direct inflation targeting strategy in 1998,” we read.


According to economists, the MPC is approaching the end of the interest rate hikes cycle. The report was published before the July meeting of the Council and press conference of the president of the NBP and the chairman of the MPC Adam Glapiński.

The Monetary Policy Council raised interest rates by 50 basis points during its meeting on Thursday. The main benchmark interest rate rose to 6.50 percent, the highest level since August 2004.

The decision was in line with the forecasts of PKO BP economists. The bank’s representatives expect interest rates to increase by 50 basis points during the September meeting. The next decision-making meeting of the MPC will be held on September 7. According to the current schedule, the meeting scheduled for August 23 will be non-decision.

If this scenario were true, the reference rate would go up to 7.00 percent. According to PKO BP, this may be the end of the rate hikes cycle. According to economists’ forecasts, the first reference rate cut may take place in the third quarter of 2023. The main NBP rate is then expected to be at 6.50 percent. In the fourth quarter of next year, it should be 5.75 percent.

In the opinion of economists, incl. The MPC may take into account that the current cycle of rate hikes will be more costly for economic growth than it results from the previous estimates. It was also pointed out that, according to the research of the central bank, an increase in WIBOR 3M by 1 percentage point after 3-5 quarters reduces the dynamics of the Gross Domestic Product (GDP) by 0.2-0.4 percentage points, and inflation by 0.2-0. 3 percentage points.

Also read: Good signal for borrowers. The first drop in two months

The WIBOR ratios, on which the amount of the loan installment depends, increase along with the interest rate increases. On Friday, WIBOR 3M was at 7.08 percent and WIBOR 6M at 7.38 percent. These are the highest levels since 2004.

Fiscal policy and the labor market

PKO BP economists pointed out that the picture of public finances in the mid-2022 is positive. As they noted, the state budget surplus increased to PLN 12.1 billion after May. “We still forecast that the increase in the fiscal deficit in 2022 will be moderate (it will remain below 3 percent of GDP), and in 2023 it is possible to return to the path of its reduction” – economists forecast.

“Almost a million foreigners registered with the Social Insurance Institution at the end of May suggest that the income situation of the social insurance subsector is also positive,” we read in the “Economic Quarterly”.

Economists have indicated that between April and June, the domestic labor market “was still strong and absorbed large numbers of refugees, but is starting to weaken.” The data was quoted as showing that employment based on simplified procedures has already been taken up by over 250,000 jobs. war refugees.

PKO BP economists predict that “the economic downturn will weaken the domestic labor market, but without rising unemployment.” Their forecasts show that the registered unemployment rate in 2022 will be 4.7 percent, and in 2023 it will drop to 4.1 percent.


In addition, according to representatives of the largest bank in Poland, the increase in wages in the economy will not permanently exceed 10 percent. “An important factor boosting the wage dynamics in 2023 will be the increase minimum wage by 14.6 percent (to PLN 3,383 from January 1 and PLN 3,450 from July 1) “- it was indicated.

Main photo source: Bartlomiej Magierowski / East News

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