The government will withdraw from zero VAT on food, which may result in lower inflation in the first half of the year and an increase after June. Overall, however, inflation will be lower than in 2023. The Monetary Policy Council will cautiously reduce interest rates – these are some of economists’ forecasts for the next 12 months.
Business Insider asked several banks and analytical centers about what we can expect in the economy in the coming months. Economists predict that the central bank will return to loosening monetary policy, and the main NBP rate will drop to 5.25% at the end of 2024. What about interest rates, which translate into loan installments?
“In our opinion, the Monetary Policy Council will continue to reduce interest rates next year, but it will do so cautiously. In total, we expect a reduction in rates by 75 basis points in 2024. The main NBP rate will be 5% at the end of next year. We expect that the rhythm will be set by the next NBP projections (March, July, November), which will allow for a better assessment of future inflation trends,” say Alior Bank analysts.
What next with zero VAT?
One of the last decisions of the outgoing government was the extension of zero VAT on food – it will be valid until March 31, 2024. Donald Tusk’s government will have two options: it will extend the shield in force until February 2022 or waive it from April. Zero VAT cannot be maintained indefinitely, especially as food prices stabilize. The decision will be politically unpopular, but at some point it will be necessary. According to Alior Bank economists, the government’s withdrawal of support for food and energy prices may result in lower inflation in the first half of the year and an increase in it after June.
“Due to the process of leaving the inflation shields, inflation will be lower in the first half of 2024 – on average approx. 4%. y/y than in the second half – on average approx. 5.5%. y/y” – Alior analysts predict.
However, PKO BP experts do not rule out that Donald Tusk’s government will decide to extend the zero VAT on food and covers related to electricity or gas prices.
Experts expect that inflation will permanently reach the target only in 2026, although some analysts believe that this may happen as early as the second half of 2025.
Strengthening the zloty permanently
The coming quarters may bring stabilization of the zloty: according to economists surveyed by Business Insider Polska at the end of this year. we will pay approximately PLN 4.33 for the euro, which is more or less the same as today. For the US dollar it is PLN 3.93, which is also a similar level to the level recorded at the end of last year.
“The progressive improvement in the domestic economic prospects and the post-election change in the perception of the Polish currency among foreign investors create moderately optimistic prospects for the Polish zloty for 2024. It is true that we believe that the scope of the potential appreciation of the Polish currency in the following months should not be significant,” say Bank Millennium experts.