Economic concerns loom large as Poles prepare to vote

Ahead of Sunday’s elections in Poland, petrol is being sold by the state energy giant Orlen at budget prices in what experts called “an election present”.

For analysts this is just one example of an economy managed for political gain by a government that is putting off difficult choices for later.

“The peculiarity of this government is an economic policy that is totally dominated by the short-term effect without long-term considerations,” said Witold Orlowski, head of experts at the consultancy PwC Poland.

Since the populist Law and Justice (PiS) party came to power in 2015, Poles have enjoyed high social welfare benefits while the government has made enormous investments in infrastructure and defence.

Many experts question whether these are the signs of a flourishing economy or of a government that is managing the accounts to make things seem better than they are.

The opposition has made economic worries part of its election campaign, while the government has focused on national security, sovereignty and migration.

Whether or not PiS win a third term or are defeated by the liberal Civic Coalition opposition on Sunday “it is clear that the economic situation will not be easy to handle” for any government, Orlowski said.

The focus so far has been on consumption rather than dealing with debt and inflation or boosting investments — measures that would spur long-term growth.

Inflation has remained high in Poland, with the EU forecasting a figure of 11.4 percent for 2023.

Investments meanwhile have fallen to just 16.7 percent of gross domestic product (GDP) — the lowest level in 20 years, below the EU average of 22.5 percent.

Growth is expected to remain sluggish with a forecast of 0.5 percent expansion in 2023, according to the EU.

– Lack of transparency –
Even if public debt in Poland remains relatively low at around 49 percent of GDP “we do not know the full extent of debt because the data has been distorted or disguised by the government,” Orlowski said.

“This lack of transparency in public finances is scandalous” particularly since the government has recently made large arms purchases from South Korea and the United States after Russia’s invasion of Ukraine.

Analysts and business owners are also critical of regulatory and fiscal instability, the chaos of the justice system and the bad investment climate created by constant tensions with the European Union.

If the opposition wins, it has promised to quickly resolve problems with the EU so as to unblock funds frozen by Brussels over government reforms of the judiciary seen as undermining rule of law.

Another problem is “bad management in a majority of state enterprises, with informal price controls in the energy market,” Cezary Wojcik, a Warsaw School of Economics professor, wrote in the Rzeczpospolita daily.

The decrease in fuel prices has created shortages in petrol stations, with Poles rushing to hoard fuel fearing the price will go up again after the elections.

Prices for gas, electricity and heating are expected to rise in the first quarter of 2024 when government-imposed controls are set to run out.

These measures have helped hold back inflation and were followed by decreases in interest rates.

Mariusz Zielonka, an economic expert at the employers’ organisation Lewiatan, called it “a fictional fight against inflation”.

Orlowski said that central bank policy has become “a cover for regular politics” and all eyes would be on what the bank does once the election result is out.

The big worry is that Poland is entering a period of “stagflation” with high inflation and low growth.

“Poland does not risk an immediate catastrophe but it needs a medium-term stabilisation plan,” Orlowski said, adding: “It will be difficult but it’s not desperate”.


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