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Inflation in Poland is galloping at almost 18 percent, with core inflation—which leaves out food and fuel price increases—above 10 percent.
The country’s central bank has boosted its benchmark interest rate to 6.75 percent, barely a third the size of inflation, but has paused further increases because past ones already have significantly weakened economic performance.
Poland is not a member of the Eurozone and does not abide by the European Central Bank’s [ECB’s] decisions on interest rates—nor can it turn to the ECB for help.
Interest rates on loans in Poland are rarely fixed, so consumers are seeing monthly payments for homes, cars, credit cards, and similar borrowing rise steadily.
As a result, the residential construction industry has spun down by 46 percent so far this year.
The only thing preventing a crash in the consumer economy is the approximately 2.6 million Ukrainian refugees who have taken shelter in Poland.
Poland’s economy will grow by 3.8 percent this year but only by 0.5 percent in 2023, the International Monetary Fund has predicted.
The strong dollar has worsened the country’s predicament.
Poland imports a significant amount of industrial goods and materials from Asia and must pay for those purchases in dollars, but accepts euros for the items it exports to its European neighbors.
The euro has tanked against the dollar this year, falling to parity at one point, as we reported in “ECB Fears Damage From Weak Euro” (13 Sep 2022).
As a result, Polish factories are paying higher prices for raw materials they buy and collecting less money for the finished products they sell.
Poland also has signed arms purchase contracts worth billions of dollars with U.S. defense manufacturers and will be required to pay for that weaponry in dollars.
The array of economic hardships has pushed 1.6 million Poles below the poverty line of about $145 per month per person, according to the European Anti-Poverty Network.
Another 4.6 million Poles earn less than half the nation’s average monthly income.
The statistics do not include homeless persons.
The energy crisis wrought by Russia’s war in Ukraine and resulting Western sanctions is one root cause of Poland’s crisis.
Universities have begun holding their lectures online to save electricity, the price of which has risen about 700 percent this year. Schools and daycare centers have been told to implement energy-use reduction measures but have been forbidden to adopt distance learning.
Another root cause is the price of food.
By September, this year’s price of milk, pasta, and salt had grown by 37 percent, rice and flour 20 percent, and sugar 100 percent. During the first half of 2022, meat prices had added 31 percent and fruit 24 percent.
As prices rose, shoplifting incidents ballooned by 27 percent, leading supermarkets to put anti-theft devices on butter.
The crisis has set off small protests in cities around the country.
TRENDPOST: Poland is a prime example of our Top 2022 Trend of Dragflation, in which economic productivity crumbles while prices keep rising. It is also one example of many in the region; Germany, the U.K., and other European nations are traveling the same downward path.
And now, with the alleged Russian missile strike in a Polish city which borders Ukraine which has killed two citizens, the more the war machine ramps up against Russia, the higher inflation will rise and the deeper the
economy will fall.
And, as Gerald Celente has said, “When all else fails, they take you to war”… and war with Russia is on the near horizon.