Poland's manufacturing industry continues to face significant hurdles, despite slight improvements in recent months, while new data on wage inequality reveals a stark contrast between median and average salaries.
At the same time, falling fuel prices, energy price caps, and upcoming interest rate cuts are shaping the broader economic landscape, as Poland leads Central Europe in GDP growth amidst mixed performances across the region.
The manufacturing sector in Poland continues to face considerable challenges, although there are signs that conditions may be stabilizing compared to recent months. The latest data from the Purchasing Managers' Index (PMI), a widely-used measure of the health of the manufacturing industry, shows a modest increase, rising to 47.8 points from 47.3 in the previous month. This marginal improvement indicates that more businesses are seeing some growth in production, new orders, or employment. However, it is essential to note that the index remains below the 50-point threshold, meaning that most companies still report difficulties, and pessimism continues to dominate.
Poland’s PMI has been stuck below the 50-point mark for 28 consecutive months; a streak that began in May 2022, shortly after Russia's invasion of Ukraine. This event caused a significant disruption to global energy supplies, triggering a crisis that reverberated across Europe, particularly in countries like Poland. The energy shock led to soaring costs for industries, compounded by rising inflation that hit the entire continent. Even though inflation rates have gradually decreased from their peak, the ongoing conflict continues to create uncertainty, and the manufacturing sector is far from making a full recovery. Nevertheless, the latest PMI reading, the highest in five months, offers a glimmer of hope that the worst may be behind Poland, with the possibility of further stabilization in the coming months.
One of the industries most impacted by the war in Ukraine is the oil sector. At the onset of the conflict, fears of potential fuel shortages across Europe led to a dramatic spike in prices, with refinery margins reaching unprecedented levels. Those boom times have now passed. According to a recent report from Orlen, Poland’s largest oil company, refinery margins fell to just $7.20 per barrel in August, the lowest level seen since February 2022, essentially bringing them back to where they were before the war began. For Orlen, and its shareholders, this sharp decline in margins represents a significant reduction in profitability, though it does mirror global trends.
Poland’s PMI has been stuck below the 50-point mark for 28 consecutive months; a streak that began in May 2022, shortly after Russia's invasion of Ukraine. This event caused a significant disruption to global energy supplies, triggering a crisis that reverberated across Europe, particularly in countries like Poland. The energy shock led to soaring costs for industries, compounded by rising inflation that hit the entire continent. Even though inflation rates have gradually decreased from their peak, the ongoing conflict continues to create uncertainty, and the manufacturing sector is far from making a full recovery. Nevertheless, the latest PMI reading, the highest in five months, offers a glimmer of hope that the worst may be behind Poland, with the possibility of further stabilization in the coming months.
The oil industry and refinery margins return to pre-war evels
One of the industries most impacted by the war in Ukraine is the oil sector. At the onset of the conflict, fears of potential fuel shortages across Europe led to a dramatic spike in prices, with refinery margins reaching unprecedented levels. Those boom times have now passed. According to a recent report from Orlen, Poland’s largest oil company, refinery margins fell to just $7.20 per barrel in August, the lowest level seen since February 2022, essentially bringing them back to where they were before the war began. For Orlen, and its shareholders, this sharp decline in margins represents a significant reduction in profitability, though it does mirror global trends.
It’s important to understand that the refinery margin reported each month is based on a theoretical model. This margin reflects the difference between the market price of crude oil and the sale prices of refined products like petrol and diesel. While it gives an indication of general profitability, it doesn't account for the full range of costs that refineries face, such as wages or the expense of adding bio-components to fuel, which are required by European regulations. Consequently, although shrinking refinery margins typically signal reduced profitability in refining operations, they do not provide a comprehensive view of the company's financial position.
As refinery margins shrink globally, we are seeing a corresponding drop in oil and fuel prices on international markets. This trend has also reached Poland, where fuel prices at petrol stations have been falling steadily and are expected to decrease even further. According to experts from BM Reflex, a leading brokerage firm specializing in fuel market analysis, petrol and diesel prices are predicted to drop by another PLN 0.05-0.1 per liter this week. Currently, the average price for both petrol and diesel stands at PLN 6.21 (€1.45) per liter, marking the lowest price point since October of last year.
Wholesale fuel prices have dropped even further, with petrol now at its lowest level since December 2021 after a significant PLN 0.2 per liter drop last week. Diesel prices have followed a similar trajectory, falling by PLN 0.15 per liter. Given the sharp decline in wholesale prices, further reductions at petrol stations are almost inevitable. It’s interesting to note that back in December 2021, when wholesale prices were at comparable levels, the price of petrol at the pump was around PLN 5.75 (€1.34) per liter – over PLN 0.4 cheaper than it is today. This difference can be partially attributed to lower retail margins at the time. According to the Polish Organization of Oil Industry and Trade (POPiHN), retail margins were nearly zero in 2021, whereas by June of this year, they had risen to approximately PLN 0.25 per liter.
The median salary in Poland is 23% lower than the average, according to data recently released by Poland's Central Statistical Office (GUS), which has finally begun publishing these figures after months of anticipation. Although the data is a few months old, covering March 2023, it still provides a fascinating look into wage trends.
The median salary represents the point at which half of workers earn less and the other half earn more. In March, this median figure was PLN 6,549 (€1,530) before tax, while the average salary was PLN 8,605 (€2,010). The consistent gap between the median and the average salary can be attributed to a small group of high earners whose substantial incomes skew the average upwards. In contrast, the median remains unaffected by outliers, offering a more balanced view of typical earnings in the country.
Interestingly, the smallest gap between median and average salaries is found in the mining sector. Here, the median salary is PLN 9,935 (€2,320) compared to the average of PLN 10,407 (€2,430), a difference of just 4.5%. A similar trend is seen in public administration, where the difference is only 8.9%. On the opposite end of the spectrum is the finance and insurance sector, where the gap is a staggering 36.5%, indicating that top earners in banking and insurance are paid significantly more than their lower-level colleagues. In stark contrast, the wage gap between a coal mine CEO and a miner is much smaller than that between a bank executive and a junior employee.
GUS also released data on wage differences between men and women, broken down by each region. Nationally, men earn around 7% more than women on average, but there are several areas where women out-earn men. These regions tend to have overall wages below the national average. For example, in the Podlaskie and Świętokrzyskie provinces (in the north east and south central Poland respectively), women generally earn more than men. Similarly, in cities like Zamość (a city of 62,000 inhabitants in southeastern Poland - ed), women earn 6.2% more than men on average, with similar trends in places like Łomża (5% more), and Konin (4.2% more). Other cities with this trend include Radom, Białystok, Chełm, Biała Podlaska, Kielce, and Piotrków Trybunalski. The largest gender pay gap in favor of women is in the Przysucha district near Radom (in east-central Poland - ed), where women earn 14.1% more than men. There, the average salary for men is PLN 7,086 (€1,660), while for women it is PLN 8,247 (€1,930).
This regional breakdown highlights how wage dynamics in Poland are shaped not just by industry, but also by geography and gender. The publication of these figures marks an important step towards greater transparency in understanding wage inequality in the country.
Fuel prices fall to their lowest in a year
As refinery margins shrink globally, we are seeing a corresponding drop in oil and fuel prices on international markets. This trend has also reached Poland, where fuel prices at petrol stations have been falling steadily and are expected to decrease even further. According to experts from BM Reflex, a leading brokerage firm specializing in fuel market analysis, petrol and diesel prices are predicted to drop by another PLN 0.05-0.1 per liter this week. Currently, the average price for both petrol and diesel stands at PLN 6.21 (€1.45) per liter, marking the lowest price point since October of last year.
Wholesale fuel prices have dropped even further, with petrol now at its lowest level since December 2021 after a significant PLN 0.2 per liter drop last week. Diesel prices have followed a similar trajectory, falling by PLN 0.15 per liter. Given the sharp decline in wholesale prices, further reductions at petrol stations are almost inevitable. It’s interesting to note that back in December 2021, when wholesale prices were at comparable levels, the price of petrol at the pump was around PLN 5.75 (€1.34) per liter – over PLN 0.4 cheaper than it is today. This difference can be partially attributed to lower retail margins at the time. According to the Polish Organization of Oil Industry and Trade (POPiHN), retail margins were nearly zero in 2021, whereas by June of this year, they had risen to approximately PLN 0.25 per liter.
Wage inequality in Poland: a closer look at median salaries
The median salary in Poland is 23% lower than the average, according to data recently released by Poland's Central Statistical Office (GUS), which has finally begun publishing these figures after months of anticipation. Although the data is a few months old, covering March 2023, it still provides a fascinating look into wage trends.
The median salary represents the point at which half of workers earn less and the other half earn more. In March, this median figure was PLN 6,549 (€1,530) before tax, while the average salary was PLN 8,605 (€2,010). The consistent gap between the median and the average salary can be attributed to a small group of high earners whose substantial incomes skew the average upwards. In contrast, the median remains unaffected by outliers, offering a more balanced view of typical earnings in the country.
Interestingly, the smallest gap between median and average salaries is found in the mining sector. Here, the median salary is PLN 9,935 (€2,320) compared to the average of PLN 10,407 (€2,430), a difference of just 4.5%. A similar trend is seen in public administration, where the difference is only 8.9%. On the opposite end of the spectrum is the finance and insurance sector, where the gap is a staggering 36.5%, indicating that top earners in banking and insurance are paid significantly more than their lower-level colleagues. In stark contrast, the wage gap between a coal mine CEO and a miner is much smaller than that between a bank executive and a junior employee.
GUS also released data on wage differences between men and women, broken down by each region. Nationally, men earn around 7% more than women on average, but there are several areas where women out-earn men. These regions tend to have overall wages below the national average. For example, in the Podlaskie and Świętokrzyskie provinces (in the north east and south central Poland respectively), women generally earn more than men. Similarly, in cities like Zamość (a city of 62,000 inhabitants in southeastern Poland - ed), women earn 6.2% more than men on average, with similar trends in places like Łomża (5% more), and Konin (4.2% more). Other cities with this trend include Radom, Białystok, Chełm, Biała Podlaska, Kielce, and Piotrków Trybunalski. The largest gender pay gap in favor of women is in the Przysucha district near Radom (in east-central Poland - ed), where women earn 14.1% more than men. There, the average salary for men is PLN 7,086 (€1,660), while for women it is PLN 8,247 (€1,930).
This regional breakdown highlights how wage dynamics in Poland are shaped not just by industry, but also by geography and gender. The publication of these figures marks an important step towards greater transparency in understanding wage inequality in the country.
Interest rates in Poland: changes expected by 2025
The Governor of the National Bank of Poland (NBP), Adam Glapiński, has hinted that interest rates may start to fall by early 2025, with March being the likely starting point for any cuts. However, Glapiński emphasized that any reduction would depend on inflation being brought under control and the NBP's inflation forecasts showing a return to the central bank's target of 2.5% in the coming quarters. The next inflation projection from the NBP is expected in November, but the key date for rate-cut watchers may be March 2025, when inflation is forecast to peak before starting to decline.
The financial markets have already begun to anticipate potential cuts, with the Warsaw Interbank Offered Rate (WIBOR) forecast to drop from its current level of 5.86% to 5.49% by February 2025. Once inflation shows a clear downward trend, the Monetary Policy Council is expected to act, reducing the cost of borrowing and potentially boosting the economy.
Energy price caps and government spending
The freezing of household electricity prices in Poland at the current level of PLN 500 (€117) per megawatt-hour for next year is expected to cost the government PLN 4.4 billion (€1.03 billion), according to Climate and Environment Minister Paulina Hennig-Kloska. She noted, however, that only PLN 2 billion (€469 million) has been allocated for this purpose in next year’s budget, though there are "additional sources of funding on the horizon," without specifying what these might be.
Crucially, she confirmed that the government and its ruling coalition have agreed to extend the electricity price support measures for another year. Finance Minister Andrzej Domański echoed this in subsequent comments. Yet, if the funds remain at PLN 2 billion (€470 million), it’s clear the price freeze can only be extended until mid-2025, not the entire year.
The concept behind freezing electricity prices is to artificially keep them at a level acceptable to consumers, below the market rates in the wholesale market, until those market prices drop to the "frozen" level. At that point, the government can "unfreeze" prices without causing a noticeable impact on consumers. This system was introduced in 2022 after electricity prices surged following Russia’s invasion of Ukraine. It helped shield consumers from exorbitant bills two years ago, and many companies avoided bankruptcy due to the sudden rise in costs. However, the system costs the state several billion złoty annually, making it necessary to phase it out gradually.
Currently, contracts for electricity delivery in 2025 on the wholesale market are priced at around PLN 450 (€106) per megawatt-hour. If they drop by another few percentage points and remain at lower levels, the Energy Regulatory Office (URE) could consider lowering tariffs for household electricity prices. In this case, the government may be able to phase out the price freeze, as switching to URE tariffs wouldn’t result in a price increase for consumers.
Central Europe’s mixed economic performance
The European Union's economy continues to grow at a very slow pace, with Central European countries showing mixed results in the latest rankings of quarterly growth rates. Overall, the EU's GDP grew by just 0.2% in the second quarter compared to the first. Poland emerged as the strongest performer, with a GDP increase of 1.5%. Slovakia's economy expanded by 0.4%, and the Czech Republic saw growth of 0.3%. In contrast, Hungary's GDP contracted by 0.2%.
In the Baltic states, the situation is similarly varied: Lithuania posted growth of 0.7%, while Estonia's economy remained stagnant, and Latvia experienced a 0.9% contraction. On the Balkan front, Croatia led with a 0.8% rise in GDP, followed by Bulgaria with 0.5% growth. Slovenia's GDP increased by 0.2%, and Romania by 0.1%.
No EU member state is currently in a technical recession, defined as two consecutive quarters of negative growth. However, if the next quarter also shows contraction, some countries like Latvia, Hungary, Austria, Germany, Sweden, and Ireland may officially enter a recession.
Weaker eurozone GDP figures have led most economists to predict that an interest rate cut by the European Central Bank is now almost certain. A decision on this is expected at the ECB's upcoming meeting this Thursday.
