PiS Responsible for Scale of Inflation in Poland

Current inflation is partly the result of global processes: rising energy commodity prices and disruptions in supply chains. However, its scale in individual countries is the result of the policies of individual governments.

According to estimates by the Polish Central Statistical Office (GUS), November inflation in Poland increased to 7.7%. According to the GUS data, the prices of fuels increased by almost 40% during the year, energy (including electricity and gas) by 13%, and food by over 6% [1]. Yesterday, one could see the statistics that showed that among developed countries Poland is already on the podium and only Russia is ahead of us.

It is almost certain that inflation will exceed 8% in 2022. This is the highest inflation in Poland in twenty-one years. We are returning to a completely different era before Poland joined the European Union (EU).

The Law and Justice (PiS) party has consistently worked to accelerate this process. Examples?

The interest rates introduced by the National Bank of Poland (NBP) during the COVID-19 pandemic, which led to a huge credit boom, were definitely too low. In the short term, this accelerated inflation, leading to drastic increases in the prices of building materials. In the long run, it may turn out that mortgage loans have fallen into the hands of people who will not be able to bear them.

Poland’s disastrous monetary and international policy led, among others, to the collapse of the zloty exchange rate. In recent months, investors have stopped believing in the stability of the Polish economy and currency. This was largely due to the government’s policy towards the European Union, the blockade of funds for Poland, the speech of the Prime Minister of the Republic of Poland delivered to the European Parliament and his famous interview for the Financial Times.

PiS has for years artificially increased the minimum wage, thus indirectly driving up prices. A large part of PiS’s policy of financial transfers to citizens also had its own consequences that fueled the demand.

Law and Justice is constantly increasing taxes in Poland on an unprecedented scale. In 2021 alone, the following taxes were introduced or increased: the sugar tax, the capacity fee, the trade tax, the mickey fee, and the rain fee, among others.

The real taxation of general partnerships and limited partnerships was increased. It is worth remembering in the context of fuel prices that PiS previously introduced the so-called emission fee and increased the fuel surcharge twice.

Confederation politicians claim that PiS has already introduced forty-five new taxes and fees during its rule. This government tax policy deserves more than a solid report. Higher taxes for entrepreneurs obviously mean higher prices for goods and services. In such a situation, entrepreneurs do everything they can to compensate for the loss of revenues.

Another great inflationary impulse in the first months of the new year will be the disastrous program of the Polish Deal. The program takes away a huge part of the income of Polish local governments and forces them to drastically increase the prices of their services. For many social groups, especially for small entrepreneurs and the middle class, the program will also mean another significant increase in the tax burden.

Poland is a part of the global economic system. Obviously, world trends also determine the Polish economy. However, the government’s economic policy allows certain phenomena to be mitigated, just as the government of Donald Tusk made Poland’s transition through the economic crisis after 2008 relatively gentle on citizens. On the other hand, it has the power to reinforce negative trends, as PiS has done in the case of the current inflation, which is hitting every citizen increasingly hard.

Finally, one must also remember that inflation is a phenomenon that can easily get completely out of control and ruin the entire economy. Stopping the self-winding inflation spiral is extremely difficult and painful.

[1] https://www.tokfm.pl/Tokfm/7,103090,27858627,rekordowe-wzrosty-cen-w-listopadzie-gus-oglosil-szacunki-dot.html?fbclid=IwAR09RRyMTmhXq977P44EIhYN728evg6-hKfC5_nuc8N6jtrYJ4dnEpgGmtc

The article was originally published in Polish at: https://liberte.pl/pis-odpowiada-za-skale-inflacji/

Translated by Olga Łabendowicz