December 1, 2022

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How long will the prices last?  New NBP report leaves no room for illusions

How long will the prices last? New NBP report leaves no room for illusions

Inflation in 2023 will remain high

NBP in its latest report on inflation It indicates that, according to the bank’s analysis, assuming unchanged interest rates and taking into account the data available until June 22, 2022 – annual inflation will be “with a probability of 50%”:

  • 13.2-15.4 percent in 2022
  • 9.8-15.1 percent in 2023
  • 2.2-6.0% in 2024

This means that In the worst case scenario, over the next year, price increases will be similar to this year, and inflation will total around 15%. The lower band also shows that the significant price increase, i.e. 9.8 percent, will be maintained. Thus, the Dutch National Bank revised its forecast for March, according to which inflation in 2022 was in the range of 9.3-12.2%, and in 2023 it was scheduled to be 7-11%.

However, the NBP report also included a chart in which it also presents alternative, and sometimes even extreme, variables of inflation growth. In the worst case scenario, inflation in early 2022 and 2023 could reach … 27%. However, as the NBP emphasized, the entire portion of the graph in the gray background “illustrates the uncertainty in predictions of these variables in the projection horizon”.

Moreover, the “central projection” on the graph, that is, it is not an extreme variable, indicates up to 19 percent. Inflation in early 2022/2023. The chart also shows another important aspect: the peak of inflation, which will be at the beginning of the year and possibly the first quarter of 2023. These forecasts differ slightly from the previous statements of the head of the National Bank of Poland, Adam Glapiński, of He said during the conference after raising interest rates in July:- If necessary, if inflation rises, we will continue to raise interest rates. But the picture that emerges from the report is that the peak of inflation is during the summer holidays. From this summit, we will begin our descent slowly.

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GDP growth expected to drop sharply

NBP’s outlook for economic growth in Poland is also not optimistic. Here, too, the report confirms that this prediction has a 50% probability.

According to the Central Bank, in 2022, the GDP growth rate will reach 3.9-5.5 percent. This year, which is just a slight adjustment compared to the March forecast which assumes 3.4-5.3%.

However, the GDP forecast for 2023 was further verified – according to the July report, the increase is expected to reach 0.2-2.3%, while NBP in March forecast a range of 1.9-4.1%. This is a significant shift in both the lower and upper bounds.

“In the years 2023-2024, along with the waning influence of factors that increase its level this year, CPI inflation will decrease, but Until nearly the end of the projection horizon, it will not return to the range of deviations from the NBP inflation target set as 2.5% +/- 1 percentage point. The reasons for the gradual decline in inflation are the slowdown in aggregate demand growth in the economy, the reduction of cost pressure from the labor market, the supposed gradual decline in commodity prices in world markets, and the disappearance of the effects of price tension in the market. networks,” explains NBP.

The text has been updated. We will provide more information in a moment.

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