Over the course of this year, economic growth will certainly be lower than last year, but inflation will be lower and will fall below 10 per cent in the second half of 2023, said economist Professor Piotr Krajewski of the Faculty of Economics and Sociology at the University of Lodz.
“One of the indicators showing how the economy will develop is the gross domestic product. Unfortunately, the information is not good – while in 2022 the economy was developing quite fast, growing by 4 per cent during the year. Then, throughout 2023, economic growth will certainly be less than 1 per cent. Lower economic growth means less money in people’s wallets, possibly a little higher unemployment,” Prof Krajewski stressed.
The second indicator and also a piece of hot news is inflation. The economist noted that it was at a record high last year, especially for those Poles who do not remember the late 1980s and early 1990s.
“The good news is that inflation will be lower this year, but we have to be patient, because, in the first half of the year, it will probably still be high, only in the second half will it fall below 10 per cent and gradually decrease. However, it will not be the case that we wake up one day and there will be no inflation at all. It will be a slow and gradual process,” he pointed out.
We need to keep in mind two elements of uncertainty affecting the situation in the country. One is the war in Ukraine – we don’t yet know whether something will happen that will shake the world, the other is the elections, announced for the autumn. “There may be, for example, election promises that will make inflation jump a little bit,” Prof Krajewski announced.
Last year’s price rises were very steep, up 17 per cent compared to prices in 2021. According to the economist, in the coming months, even though inflation has stalled, prices will continue to rise, but at a slightly slower pace.
“What is important about inflation is that price increases do not affect all components equally. If it were the case that every price rises by the same amount (percentage – editor’s note) and we all earn the same amount more, we would hardly feel it. (…) The problem with inflation is that it affects some less and others more, and we do not know whether the price of bread or electricity will rise more. Some bakeries in Łódź have gone bankrupt because electricity or gas prices are so high that their business has become unprofitable. But now it may turn out that electricity prices will rise less and bread prices will rise more, and then such businesses will function well,” he explained.
In Prof Krajewski’s opinion, the optimal situation is when prices are stable and predictable, because their decrease – desired by consumers – for economists means, above all, lower profitability of enterprises. Such a decline, he added, should not be expected, but price stability could be achieved by the end of this year or early next year.
The economist added that he sympathised with all those who have to repay loans, especially as Poles had become accustomed to low-interest rates in recent years.
“A significant proportion of people taking out a loan thought that this would always be the case. Of course, I know that borrowers may be outraged at me, but there are also positive aspects of the interest rate rise. Savers will get a bit more in interest – and they are losing a lot because interest rates have never been high and are still lower than inflation. And it’s not just the very rich, but, for example, pensioners,” he pointed out.
Less demand for loans, according to Krajewski, will cause housing prices to fall. He noted that while it is more difficult to get a loan, this change could burst the ‘bubble’ in the real estate market – future buyers of flats should be happy, while investors living from renting them will not.
“However, for the majority of the population, especially young people, cheaper housing is a positive development,” he noted.
For average earners who are concerned about how the projected economic situation will affect their status, the economist has two pieces of advice.
“My advice would be to take care of the job you have because economic growth will be slower and it may be that not everyone will keep their jobs. It is worth making yourself more attractive in the labour market by further training and acquiring new skills, such as postgraduate studies or language courses. It should be very important to prevent inflation from eating away at our savings in those areas where there has clearly been an increase in prices, i.e., fuel, heating, and housing maintenance, e.g. if someone has a very large flat, it may be worth thinking about replacing it with a smaller one that is cheaper to maintain”. – Prof Krajewski stressed.