Inflation in Poland: Prices are Rising at the Fastest Pace in 10 Years
In April last year, Adam Glapiński and Mateusz Morawiecki warned that the spectre of deflation rather than inflation loomed over the Polish economy. The last several months have verified their warnings: since then, prices in Poland have been rising faster than before the pandemic.
According to Statistics Poland (GUS), inflation in May was 4.8% - the highest in 10 years. If such inflation continues throughout 2021, the average Pole, wishing to maintain their standard of living, will spend nearly PLN 700 more than last year.
In addition, if such inflation persists over the next 12 months, and interest rates on current accounts and deposits remain unchanged, the average adult Pole will lose nearly PLN 1,200 in real terms.
IInflation is a form of hidden tax. "Hidden" because it is not introduced by law by parliament, and its effect is poorly understood by the public; nor do we see it in the annual accounts. It is referred to as a "tax" because the biggest beneficiary of inflation is the public finance sector (the state).
Inflation particularly hits the poorest. The lowest-income households invest relatively more of their savings in instruments that are not immune to inflation (cash and bank deposits) and are less indebted than high-income households.
Contact to authors:
Sławomir Dudek PhD, Chief Economist
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