Inflation in Poland: Prices are Rising at the Fastest Pace in 10 Years
Synthesis:
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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.
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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.
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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.
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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).
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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
slawomir.dudek@for.org.pl
Marcin Zieliński,Economist
marcin.zielinski@for.org.pl
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