The PiS government has allocated tens of billions of zlotys to “freezing” prices this year. If it weren’t for these extremely costly manipulations, undertaken to reduce inflation in the election year, prices would still be growing at a double-digit rate – say experts from the Civic Development Forum Foundation.
Inflation in Poland in September 2023 was 8.2%. – the Central Statistical Office reported on Friday. This reading is consistent with the previous so-called quick respect. FOR experts noted that this was still “over three times” higher than the NBP inflation target and pointed out that if it were not for the “freezing” of prices on which Law and Justice allocated “tens of billions of zlotys this year”, the result would be much different.
“If it weren’t for these extremely costly manipulations undertaken to sugarcoat inflation in an election year, prices would still be rising at a double-digit rate – We estimate that in September the price level would increase by as much as 17.9%. y/y. But the fact that the government is ‘freezing’ prices before the elections does not mean that inflation will not jump sharply after the elections – no country can afford to maintain low prices forever, and next year Poland will have one of the highest public finance deficits in the European Union. – indicated in the published announcement.
Price freeze and inflation
According to FOR, the following factors had an impact on reducing the inflation level: – nil VAT for food, – “freezing” electricity prices and gas, – promotion fuel prices on Orlen, – a new list of reimbursed drugs, – reductions in season ticket prices on state railways.
In the opinion of FOR analysts, the greatest impact on reducing inflation had the “freezing” of electricity and gas prices, approximately 7.9 percentage points (pp). In second place is zero VAT on food – approx. 1 pp, then the promotion on Orlen – approx. 0.7 pp, and the new list of medicines and cheaper tickets resulted in a total inflation reading lower by approx. 0.1 pp
“If we add these values to the flash estimate of inflation for September published by the Central Statistical Office (8.2% y/y), it turns out that without manual control of the inflation rate by the government, the price level would have increased by 17.9% y/y.” – comments FOR.
“With the actions of the last two months alone, the government and the entities it controls have lowered inflation by approximately 0.8 pp. Without these pre-election manipulations, inflation would have amounted to 9% y/y in September.” – states FOR.
“Extremely expensive manipulations”
FOR notes that “all these manipulations are extremely expensive and ineffective in the long run.” It was pointed out that only “freezing” electricity and gas prices would cost the budget PLN 66 billion. Maintaining a zero VAT rate on food means that state revenues will be lower by PLN 11 billion.
“This is happening in a year when Poland has the third highest public finance deficit in the European Union and pays the most after Hungary for public debt servicing. In fact, these extremely expensive programs are only about sugarcoating inflation before the upcoming elections, after which prices will rise again will start to grow. Next year, according to the European Commission’s forecasts, Poland is to be the inflation leader of the European Union,” we read in the FOR announcement.
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