The war in Ukraine will affect Poland’s socio-economic situation through many channels both in the short and long term. In the near term, we face weakening economic growth and even higher inflation, even double-digit inflation.
In response to Russia’s invasion of Ukraine, the Polish Law and Justice government began to work on creating two new funds in the state-owned Bank Gospodarstwa Krajowego to finance “systemic aid” and additional military spending.
The US Federal Reserve System (Fed) has announced that it will raise interest rates. They have been at zero since the start of the pandemic and since the last recession in 2009, they hit their highest level in 2019. But even in 2019, they were very low, with an effective rate of about 2.5%.
The inflation in Hungary is just as bad as it is in the rest of Europe: in 2021 the rate of the inflation was 7.4%, which was a 13-year-old record. It is a logical step from the government that they want to reduce its level and want to moderate the prices.
Inflation is often referred to as a tax, imposed without parliamentary approval, without legislation and without considering the consequences. Today’s inflation is special: printing money seemed to be pretty much the only way to respond to the pandemic and to finance rising public spending.
The economy has not yet recovered from the corona-crisis and is already threatened by another serious danger: green-flation. Based on the sound similarity of two words, inflation-greenflation, this new English phrase has only recently emerged.
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.
The 20th century could be referred to as the century of inflation. Monstrous inflation took place in many countries, such as hyperinflation in Germany in the 1920s, in Hungary after World War II, or in Zimbabwe and Venezuela in the recent past.
