Poland faces risk of stagflation next year says state fund head
The war in Ukraine and sanctions on Russia will result in a further increase in inflation, but in 2023 the Polish economy may enter a period of stagflation, the head of the state-owned Polish Development Fund (PFR) has said.
Pawel Borys told PAP on the side-lines of the LSE SU Polish Economic Forum in London that stagflation (inflation combined with high unemployment and an economic slowdown) is possible next year in Poland as attempts to rein in war-related inflation will require bolder budget tightening measures, resulting in lower GDP growth.
"The stagflation scenario is realistic, both globally and in our country, although it need not be a long-term phenomenon," he said.
"In order to lower inflation, one will have to cool down economic growth, and inflation could remain high given the current levels of commodity prices and uncertainties related in particular to food prices and crude oil," he added.
According to Borys, the impact of the war and anti-Russian sanctions are already being felt by Polish exporters to the eastern market. But the biggest negative effect, he said, is the sharp increase in the global prices of energy and agricultural commodities, which translates into rising inflation in Poland.
However, Borys added: "Poland stands a chance of seeing considerable growth in public investments next year... which will mitigate the effects of the economic downturn."