In the biggest blow to the Polish economy since February 1998, inflation across the country reached 13.9 percent in May, as the continuing conflict in Ukraine and unfavorable weather led to huge increases in energy bills and food costs.
According to the latest data from Statistics Poland (GUS), prices of consumer goods and services increased by 13.9 percent compared to the same period a year earlier. This represents a serious acceleration compared to April this year when inflation was at 12.4 percent. Such a rate of price increases was expected by analysts, and it may determine the anticipated rise of interest rates to be determined by a meeting of the Polish Monetary Policy Council on June 8.
According to economists, however, the worst is still to come. Kamil Łuczkowski, an analyst at Bank Pekao, warned that the peak price increases should be expected in August and September 2022 when inflation could hit 15.5-16 percent year-over-year. He explained that the increase would come mainly from a low reference base in 2021 and persistent significant price pressure, especially for food.
In May, food prices increased by 3.5 percent compared to the previous month, and according to Łuczkowski, while a considerable increase, it was slightly smaller than in April when a 4.2 percent month-over-month increase was recorded. Fuel prices, he noted, also went up.
Łuczkowski pointed out that currently there is a wage-price spiral, and the market is red-hot. “The business cycle will mature mid-year, and in the second half there will be a significant slowdown,” he stated, adding the condition of Polish companies remains sound thanks to high margins.
Marta Petka-Zagajewska, expert of PKO Bank Polski, had similar observations, believing that the increase of food prices bumped up inflation. She explained that the strong growth trend of food prices caused by fears over food availability were due to the war in Ukraine and unfavorable weather, and that these factors had increased the inflation rate in May by around 0.7 percentage points.
She anticipated that inflation will start to gradually slow down in the second half of the year, reflecting a decrease in customer demand, but “mostly due to a high base in the second half of 2021 when inflationary pressure started to intensify.”
