Poland’s annual inflation rate eased to 4.6% in November, down from 5% in October. However, the monthly pace of price increases accelerated, with prices rising 0.4% compared to October’s 0.3%. This uptick marks the fastest monthly growth since July, when changes to electricity price caps spiked energy costs.
The annual inflation dip is attributed to the base effect, as November 2022 saw steeper price increases. Yet, core inflation pressures persist, particularly in the food sector. Food prices rose by 0.7% month-on-month, while wholesale markets recorded a 6% rise in average food costs since March. Specific staples such as milk surged nearly 6% in the past month, reaching a 1.5-year high, while rye and wheat prices rose by 8.5% and 4%, respectively.
The reversal of last year’s declining food price trends could complicate inflation management in 2024, as these wholesale price increases are likely to filter into retail markets.
While Poland’s overall unemployment rate is relatively low – ranging between 3% and 5% depending on calculation methods – unemployment among Ukrainian refugees remains significantly higher at 19%, according to a study by the National Bank of Poland (NBP). Over half of Ukrainian immigrants are employed, and their labor force participation rate (78%) is close to the national figure for working-age individuals (82%).
However, unique challenges hinder their integration into the workforce. Many Ukrainian women, often primary caregivers, seek part-time work, which is relatively uncommon in Poland. This mismatch contributes to the higher unemployment rate among refugees.
Additionally, a stark wage disparity exists between male and female Ukrainian workers, with women earning 25% less than men, compared to a 10% gender pay gap in the broader Polish workforce. This disparity reflects the concentration of immigrants in specific industries, with male-dominated sectors typically offering higher wages.
An increasing number of Ukrainian immigrants express uncertainty about their future in Poland. Among pre-war migrants, 39% are undecided about their plans, up from 36% in earlier surveys. For post-2022 refugees, this figure has risen from 48% to 56%. While about half of pre-war migrants express a desire to stay in Poland permanently, only 20% of more recent refugees share this intention.
The reversal of last year’s declining food price trends could complicate inflation management in 2024, as these wholesale price increases are likely to filter into retail markets.
Challenges persist for Ukrainian refugees in the labor market
While Poland’s overall unemployment rate is relatively low – ranging between 3% and 5% depending on calculation methods – unemployment among Ukrainian refugees remains significantly higher at 19%, according to a study by the National Bank of Poland (NBP). Over half of Ukrainian immigrants are employed, and their labor force participation rate (78%) is close to the national figure for working-age individuals (82%).
However, unique challenges hinder their integration into the workforce. Many Ukrainian women, often primary caregivers, seek part-time work, which is relatively uncommon in Poland. This mismatch contributes to the higher unemployment rate among refugees.
Additionally, a stark wage disparity exists between male and female Ukrainian workers, with women earning 25% less than men, compared to a 10% gender pay gap in the broader Polish workforce. This disparity reflects the concentration of immigrants in specific industries, with male-dominated sectors typically offering higher wages.
An increasing number of Ukrainian immigrants express uncertainty about their future in Poland. Among pre-war migrants, 39% are undecided about their plans, up from 36% in earlier surveys. For post-2022 refugees, this figure has risen from 48% to 56%. While about half of pre-war migrants express a desire to stay in Poland permanently, only 20% of more recent refugees share this intention.
Expanded public holidays and retail adjustments
The Polish lower house of parliament, the Sejm, has passed three significant economic bills, including one introducing a public holiday on Christmas Eve.
However, rather than reducing work for retail employees, the new law adds a third shopping Sunday in December. The final vote was tight, with just two votes preventing its scrapping. The additional trading day was supported by Civic Coalition, PSL, and Poland 2050, while PiS and the Left, opposed it. Conflicting opinions within the Confederation party highlighted the contentious nature of the legislation.
While the new rules will take effect in 2024, this year’s pre-Christmas period remains unchanged, with two trading Sundays and no public holiday on Christmas Eve.
Another key measure approved by the Sejm addresses health contributions for entrepreneurs. From January 2024, income from selling fixed assets like cars or machinery will be excluded from health contribution calculations. Additionally, the minimum monthly contribution will be reduced for entrepreneurs with little to no income.
Currently set at 9% of the minimum wage, the minimum contribution will drop to 9% of three-quarters of the minimum wage, equating to PLN 315 (€68) per month. Without this adjustment, the figure would have risen to €91. This change aims to ease financial pressures on small business owners, providing relief amid a challenging economic landscape.
The third bill extends Poland’s electricity price freeze for households until the end of September 2025 and for businesses and local governments until March 2024. As compensation, the government will require energy producers to submit new tariff proposals to the Energy Regulatory Office by mid-2024. Wholesale electricity prices have declined steadily, with the average contract price for 2024 falling to €94 per megawatt-hour in November – 10% lower than six months ago.
The government hopes further reductions in wholesale prices will allow household electricity tariffs to remain stable or even decrease when the freeze ends. Businesses and municipalities, however, will transition to market rates in 2024, where current prices are already below the frozen levels, offering opportunities for cost savings through negotiation.
Poland is unlikely to introduce social security contributions for freelance and civil-law contracts until 2026, according to Katarzyna Pełczyńska-Nałęcz, the funds and regional policy minister. Speaking on Tok FM, she cited ongoing efforts to develop an alternative solution that satisfies EU milestones under the Recovery and Resilience Facility (KPO) without alienating coalition partners. Poland had initially committed to implementing these contributions by 2025 to unlock further EU funding.
The proposed changes would require freelance workers and contractors, often employed under so-called “junk contracts,” to pay pension contributions, improving their retirement benefits. However, these deductions would reduce their net income unless employers compensated with higher gross wages, increasing business costs. While intended to provide long-term benefits, the immediate financial implications make the policy politically contentious.
A recent survey commissioned by Employers of Poland underscores the debate. Among working respondents, 55% prefer higher net wages without pension contributions, while 41% value job security and stable employment contracts over immediate earnings.
Warsaw has claimed the largest office real estate transaction in Europe this year, according to developer Ghelamco. The company sold the Warsaw Unit skyscraper to Swedish investment fund Eastnine AM for €280 million. Standing 202 meters tall with nearly 60,000 square meters of fully leased office space, the building’s tenants include Moderna, Amazon, and insurer Warta.
Located in the burgeoning Wola district near Daszyński Roundabout, Warsaw Unit joins a cluster of high-profile skyscrapers redefining the city’s skyline. Marcin Koterba from property firm Cushman & Wakefield hailed the sale as a testament to Warsaw’s real estate strength, noting that prices per square meter are still at least 50% lower than in major Western European hubs like Paris or London. This disparity suggests room for price growth, with further value increases expected for prime office properties in Warsaw.
However, rather than reducing work for retail employees, the new law adds a third shopping Sunday in December. The final vote was tight, with just two votes preventing its scrapping. The additional trading day was supported by Civic Coalition, PSL, and Poland 2050, while PiS and the Left, opposed it. Conflicting opinions within the Confederation party highlighted the contentious nature of the legislation.
While the new rules will take effect in 2024, this year’s pre-Christmas period remains unchanged, with two trading Sundays and no public holiday on Christmas Eve.
Another key measure approved by the Sejm addresses health contributions for entrepreneurs. From January 2024, income from selling fixed assets like cars or machinery will be excluded from health contribution calculations. Additionally, the minimum monthly contribution will be reduced for entrepreneurs with little to no income.
Currently set at 9% of the minimum wage, the minimum contribution will drop to 9% of three-quarters of the minimum wage, equating to PLN 315 (€68) per month. Without this adjustment, the figure would have risen to €91. This change aims to ease financial pressures on small business owners, providing relief amid a challenging economic landscape.
The third bill extends Poland’s electricity price freeze for households until the end of September 2025 and for businesses and local governments until March 2024. As compensation, the government will require energy producers to submit new tariff proposals to the Energy Regulatory Office by mid-2024. Wholesale electricity prices have declined steadily, with the average contract price for 2024 falling to €94 per megawatt-hour in November – 10% lower than six months ago.
The government hopes further reductions in wholesale prices will allow household electricity tariffs to remain stable or even decrease when the freeze ends. Businesses and municipalities, however, will transition to market rates in 2024, where current prices are already below the frozen levels, offering opportunities for cost savings through negotiation.
Gov’t delays pension contributions for freelancers
Poland is unlikely to introduce social security contributions for freelance and civil-law contracts until 2026, according to Katarzyna Pełczyńska-Nałęcz, the funds and regional policy minister. Speaking on Tok FM, she cited ongoing efforts to develop an alternative solution that satisfies EU milestones under the Recovery and Resilience Facility (KPO) without alienating coalition partners. Poland had initially committed to implementing these contributions by 2025 to unlock further EU funding.
The proposed changes would require freelance workers and contractors, often employed under so-called “junk contracts,” to pay pension contributions, improving their retirement benefits. However, these deductions would reduce their net income unless employers compensated with higher gross wages, increasing business costs. While intended to provide long-term benefits, the immediate financial implications make the policy politically contentious.
A recent survey commissioned by Employers of Poland underscores the debate. Among working respondents, 55% prefer higher net wages without pension contributions, while 41% value job security and stable employment contracts over immediate earnings.
Warsaw secures Europe’s largest office deal of 2023
Warsaw has claimed the largest office real estate transaction in Europe this year, according to developer Ghelamco. The company sold the Warsaw Unit skyscraper to Swedish investment fund Eastnine AM for €280 million. Standing 202 meters tall with nearly 60,000 square meters of fully leased office space, the building’s tenants include Moderna, Amazon, and insurer Warta.
Located in the burgeoning Wola district near Daszyński Roundabout, Warsaw Unit joins a cluster of high-profile skyscrapers redefining the city’s skyline. Marcin Koterba from property firm Cushman & Wakefield hailed the sale as a testament to Warsaw’s real estate strength, noting that prices per square meter are still at least 50% lower than in major Western European hubs like Paris or London. This disparity suggests room for price growth, with further value increases expected for prime office properties in Warsaw.
Economic growth rebounds after September setbacks
Recent data for October paints a brighter picture of the Polish economy compared to September, with improvements across key indicators. Retail sales, which had fallen by 3% in September, rebounded with 1.3% growth, easing concerns of a prolonged downturn. Industrial production also outperformed expectations, increasing by 4.7% after two consecutive months of decline.
The labor market remains mixed. Employment in firms continues to decline slightly, yet the unemployment rate dropped to 4.9%. Meanwhile, wages grew by 10.2% year-on-year, marking the slowest increase this year. Analysts view this as a positive development, as rapid wage growth had previously raised inflationary and cost concerns for businesses.
Economists suggest these improvements could boost Poland’s GDP growth to around 3% in the fourth quarter, up from 2.7% in Q3. The data indicates a resilient start to the final quarter of 2023, offering hope for stronger economic momentum.
The Russian ruble has faced significant turmoil, losing nearly 15% of its value against the US dollar in just a week. At its lowest point, the exchange rate hit nearly RUB 115 to the dollar before stabilising slightly at RUB 108 on Monday morning. This marks a dramatic fall from the RUB 30 per dollar seen before Russia’s annexation of Crimea in 2014.
The ruble’s sharp decline followed US sanctions on Gazprombank, a critical facilitator of Russian gas transactions with Europe and Turkey. Since 2021, foreign buyers of Russian gas have been required to pay in rubles, creating a consistent demand for the currency. With Gazprombank now under sanctions, this mechanism is in jeopardy, weakening the ruble further.
Adding to the instability, data reveals accelerating wage growth and increasing inflation expectations among Russian households. Despite drastic interest rate hikes, inflation shows no signs of abating, prompting speculation of further rate increases. Yet, this has done little to stabilize the currency, exacerbating market jitters.
In response, the Russian Central Bank announced emergency measures, including buying rubles on the forex market and suspending foreign currency purchases. These actions have provided some temporary relief, with the ruble regaining part of its losses. The bank’s next meeting on December 20 is widely anticipated, as further interest rate hikes remain on the table.
The labor market remains mixed. Employment in firms continues to decline slightly, yet the unemployment rate dropped to 4.9%. Meanwhile, wages grew by 10.2% year-on-year, marking the slowest increase this year. Analysts view this as a positive development, as rapid wage growth had previously raised inflationary and cost concerns for businesses.
Economists suggest these improvements could boost Poland’s GDP growth to around 3% in the fourth quarter, up from 2.7% in Q3. The data indicates a resilient start to the final quarter of 2023, offering hope for stronger economic momentum.
Russia on the brink of a currency crisis
The Russian ruble has faced significant turmoil, losing nearly 15% of its value against the US dollar in just a week. At its lowest point, the exchange rate hit nearly RUB 115 to the dollar before stabilising slightly at RUB 108 on Monday morning. This marks a dramatic fall from the RUB 30 per dollar seen before Russia’s annexation of Crimea in 2014.
The ruble’s sharp decline followed US sanctions on Gazprombank, a critical facilitator of Russian gas transactions with Europe and Turkey. Since 2021, foreign buyers of Russian gas have been required to pay in rubles, creating a consistent demand for the currency. With Gazprombank now under sanctions, this mechanism is in jeopardy, weakening the ruble further.
Adding to the instability, data reveals accelerating wage growth and increasing inflation expectations among Russian households. Despite drastic interest rate hikes, inflation shows no signs of abating, prompting speculation of further rate increases. Yet, this has done little to stabilize the currency, exacerbating market jitters.
In response, the Russian Central Bank announced emergency measures, including buying rubles on the forex market and suspending foreign currency purchases. These actions have provided some temporary relief, with the ruble regaining part of its losses. The bank’s next meeting on December 20 is widely anticipated, as further interest rate hikes remain on the table.
