— At the beginning of the year at the latest, we will face very sharp increases in electricity and gas prices, which could be underestimated in the inflation projection. This would suggest that inflation in January 2023 could exceed 20%. According to projections, by the end of next year it should fall to 6%. It seems impossible, very unlikely. Well, unless we freeze the economy again, like in 2020, Kotecki said in an interview with “DGP”.
– This year, the peak will probably be in Q3 or Q4 and will be around 18%. We will see if the anti-inflationary shields will expire in October or if they will be extended. Probably at the beginning of next year, due to the increase in gas and electricity prices, we could have more than 20%. After that, inflation will start to come down, but slowly. So I cannot even rule out that the average annual inflation in 2023 will be higher than this year, he added.
The prospect of further interest rate hikes
The MPC member also admitted that we have to consider the possibility rise in interest rates in September.
– This will be supported by what we will see in public finances, in the draft budget for 2023. Unless the budget is also a plan to improve public finances, which unfortunately I do not count on in an election year he underlined.
We are facing stagflation
According to Kotecki, the Polish economy is facing a scenario stagflation. – Until now, I believed, and I maintain it, that there would be no real recession in Poland, perhaps technical. I think we’re going to have textbook stagflation. This means continued high inflation and slightly positive GDP growth, close to zero. This is the worst-case scenario the current Monetary Policy Council could face as it is unclear what to do with it, the MPC member said, noting that a rapid downturn could occur this year and turn into a 1% growth next year.
