Poland saw a lower than expected flash CPI inflation reading in December 2023, at 6.1% YoY, which was a good starting point for the first quarter of 2024, economists commented, warning, however, about uncertainty.
Poland’s CPI inflation in December 2023 was 6.1% against expectations of 6.5%, the Central Statistical Office (GUS) said in a flash estimate. GUS will publish the official reading of December 2023 inflation on January 15.
In November 2023, the CPI was at 6.6% YoY and had been steadily declining since reaching the level of 18.4% in February 2023.
“The reading surprised us positively with the inflation level coming in below expectations, both ours and the market’s,” said Adam Antoniak, an analyst at ING BSK bank.
“What is striking is the relatively low growth of food prices – on a month-on-month basis it is only 0.2%,” he added.
Antoniak pointed out that the declining core inflation was also a positive aspect.
“Overall, this is good news for the end of last year and a good starting point for the first quarter,” he concluded.
“Inflation fell noticeably to 6.1%, a result that was clearly better than forecast,” another economist, Marcin Klucznik from Polish Economic Institute (PIE), pointed out.
“We expect further extinction of inflationary pressure in the Polish economy,” he continued. “The decline in inflation in early 2024 will be further helped by base effects.”
“The CPI’s slide to 6.1% in December 2023 translates strongly into the projected path of inflation in the months ahead,” said Monika Kurtek, an analyst at Bank Pocztowy.
She added “the CPI may find itself below 4% in February and in March rub up against the upper limit of deviations from the NBP’s target, which is 3.5%.”
However, the conditions for this scenario included keeping lower VAT rates on some food products and a prolongation of the cap on energy prices for households by the government, she added, also mentioning a very high reference base from last year.
“Inflation surprised everyone by going down – I haven’t seen estimates going that low, so it’s an interesting end to the year,” said Grzegorz Ogonek, an economist at the lender Santander BP.
While all the experts admitted they were positively surprised by the reading, they were cautious in their forecasts for the whole year.
“The starting point for next year, therefore, looks much more promising, although the January reading will still be crucial for inflation levels this year, when many companies set new price lists for the new year, and here there is still a large dose of uncertainty – how companies will behave in the face of strong wage growth, including the minimum wage,” Mikolaj Raczynski from Portu investment platform pointed out.
The stabilisation of the annual CPI inflation Poland has been experiencing is mainly due to the significant drop in core inflation.
In November 2023, it fell to 7.3% YoY from 8% in October 2023.
In late December 2023, Finance Minister Andrzej Domanski said that “the coming months offer hope for a stabilisation of inflation in Poland.” (PAP/Business World Magazine)
