The National Bank of Poland has released an analysis predicting that inflation rates will remain stable throughout 2023. No decrease in prices is anticipated until 2025.

Will inflation top 20%?

The inflation peak in Poland will occur in Q1 2023. This is when inflation on an annual basis is expected to exceed 20% However, inflation should not exceed 14% in the entire 2023.

When will there be a return to the inflation targets of the National Bank of Poland?

The National Bank of Poland has released an inflation projection report for the period 2022-2025, in which it predicts that a return to its inflation target of 2.5% will likely be achieved by the end of the projected horizon, around 2025. According to the report, after inflation rates increase in Q1 2023, a gradual decrease is expected in the long term as the effects of the factors contributing to inflation start to wane. The Bank further states that, assuming their interest rates, including the reference rate of 6.75%, remain unchanged, the Consumer Price Index (CPI) inflation will likely return to within the +/- 1 percentage point range of its target by the end of the projected horizon.

Quite inaccurate projections

Despite this, the majority of experts remain skeptical of the NBP’s optimistic projections. All projections made since the start of 2020 have fallen short in accurately predicting the growth rate. The November 2021 projection, which accurately estimated the inflation rate up to the first few quarters, is the only exception. However, subsequent projections have consistently indicated a return to the inflation target.

What will influence inflation rates in future?

In the coming years, we should expect a galloping increase in the price of energy by 320.6% in 2023, by 7.7% in 2024 and by 5.6% in 2025. 

Food will increase by 13.6%, 4.4% and 1.9% respectively.

If we exclude food and energy prices, then core inflation will be 10.3% in 2023, 6% in 2024 and 3.6%  in 2025, respectively.

Moreover, actions from the ruling party are likely as parliamentary elections are slated for the fall. The Law and Justice party will endeavor to curb any increases to avoid disheartening voters. It can be anticipated that the inflation shield and various protective subsidies for households and businesses will be sustained.

“In response to the ongoing turmoil in the global energy commodity market, the government is taking measures to shield households and businesses from the impact of rising raw material prices. As a result, the forecasted trajectory of economic growth and Consumer Price Index (CPI) inflation in the coming quarters will be impacted by several legislative changes, as noted by the experts in the “Inflation Report”.

Bartłomiej Haba