Rising inflation in Poland removes the luster of the economy

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Barbara Kaczor has accepted the disorder caused by the Covid-19 pandemic. But the 41-year-old from Czestochowa in southern Poland felt tackling this year’s rapid rise in the price of more struggle.

“When you go shopping you spend so much money that you don’t know what you spent it on. I understand that prices are changing, but what is happening now is just crazy, ”she said, refusing to increase the price of everything from butter and tomatoes to gas. “Believe it or not, last year with the start of Covid was a lot easier.”

Kaczor is among the millions of Poles who feel the sting. Annual inflation reached 7.8 percent last month, the highest level in two decades and the fourth highest in the EU. With energy prices rising by more than 20 percent and gas prices by more than 50 percent next year, consumers expect more pain, and the topic has become increasingly on the political agenda.

Much of the developed world is struggling with a similar pattern. But for Poland’s ruling Law and Justice Party (PiS), wild inflation is a particularly difficult problem. The conservative-nationalist government has come under fire from the country and abroad for its democratic setback. But despite these struggles, it remained the most popular party largely thanks to its success in improving the position of less affluent Poles.

“PiS won over voters with a very simple promise: you will be better off; your wealth will increase. High inflation makes it very difficult to fulfill that promise and that is why it is so dangerous for this government, “said Marcin Duma, head of the IBRiS polling agency in Warsaw.

“Inflation is especially painful for those people who have seen their wealth grow in the last five or six years. They could go on holidays, buy things they couldn’t before. And now all of a sudden, their bills are growing and they can’t spend on the things they’re used to. “

Tadeusz Koscinski, Poland’s finance minister, says high inflation figures were ‘something that requires attention but not panic’ © Thierry Monasse / Getty

For Kaczor, who works for a company that conducts surveys and teaches foreign languages, the jump in prices meant longer working hours to make ends meet and fewer holidays and going to the cinema. “Sometimes you have to decide what the priority is,” she said. “At most, you have to pay the bills.”

Businesses are also concerned. Marcin Nowacki, deputy head of the CAP Employers’ Association, said that although not all companies are yet feeling its impact, inflation is “the biggest threat for next year”, adding: “If it stays above 10 percent, it will be very difficult , and we will all feel it, both Poles and business people. ”

The Polish opposition has tried to tackle the issue, accusing the PiS of fueling the problem with reckless spending. This month, he designed “PiS = high prices” at the ruling party’s headquarters in Warsaw. Opposition lawmakers unfurled a banner with the same message during a parliamentary session.

PiS officials say – as in much of Europe – inflation has been fueled by external factors such as energy prices and pandemic disruptions.

The government has announced a package of 10 billion zlotys ($ 2.5 billion) in temporary energy and fuel tax cuts, and also plans to cut food VAT. He also lobbied for reform of the EU’s emissions trading system: carbon license prices have more than doubled this year.

However, analysts say external factors are only part of the story. High energy prices have contributed Poland’s old coal-intensive energy system, which is why the country is particularly exposed to rising carbon permit prices. Moreover, fiscal and monetary policies have remained loose, although the economy has grown close to 5 percent in recent years and labor shortages are putting pressure on wage increases. Polish inflation was among the highest in the EU even before this year’s rise.

“We are … paying the price for the mistakes of past governments and the lack of investment in the green transition. Our energy system is outdated and has high emissions, so we need to get more carbon permits than other countries,” said Hanna Cichy, an economist at Politics to Insight in Warsaw.

“There are very severe demographic pressures, and there is a gap in competencies: not only are there not enough workers, but we do not have the appropriate skills to fill the gaps in the market.”

High inflation figures were “something to look out for, but not a big panic,” said Tadeusz Koscinski, Poland’s finance minister. “The most important thing for us as a government is to control our emotions and make sure people don’t think this is a permanent situation.”

However, if the pandemic does not intensify, economists doubt that inflation will soon return to 2.5 percent, which was targeted by the Polish central bank. Core inflation is above 4 percent and strong, so you have to expect inflation to stay above 7 percent next year, Cichy said. “It is unlikely that he will return to the central bank’s goal in 2023.”

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