While the crisis related to the onset of the pandemic in 2020 has fallen like a bolt from the blue, the one that is coming now has been expected for many months. It was known that energy prices would be gigantic, it was known that inflation was unlikely to let go – and that the Kremlin would play with raw materials in the war with the West.
It was not – and still unclear – what the weather awaits us in the fall and winter season. And this is crucial when it comes to the coming crisis.
Scenario 1. Cold winter and a serious crisis
– If there are severe frosts, greater downtime in factories is possible – says Business Insider Rafał Benecki, chief economist of ING Bank Śląski.
Which industries are most vulnerable to this? The expert replies that, for example, “construction facilities”, that is, the production of glass, metal elements, but also the chemical industry. In a word, such companies where electricity is up to 20 percent. costs (the average for the entire economy is approx. 2.5%).
However, the entire economy would be in trouble in this case. The demand for raw materials will be gigantic, and therefore energy will be very expensive. Governments will do everything to keep the residents warm, but the energy for business may already run out.
Governments – including the Polish one – will have limited opportunities to fight the crisis, as they did at the beginning of the pandemic. Of course, you can create new anti-crisis “shields” and add money to companies and households. Except it will drive inflation even more. And the world’s central banks – the US Fed, Bank of England or the European Central Bank – are signaling that they want to fight inflation by raising interest rates and cooling economic growth.
However, Benecki emphasizes here that the policy of our central bank is slightly different. – I get the impression that the goal of the NBP is the mere drop in inflation, and not bringing it down to the target. Central banks of developed countries talk about the return of inflation to the target, while the NBP declares a quick end of the cycle and then cuts as soon as inflation is lower. This means that prices continue to rise, only slower, he says.
Rafał Benecki from ING believes that that in February next year inflation may reach even 20 percent. BNP Paribas experts are a bit more cautious here and believe that “inflation will remain double-digit in the coming months” and that it may exceed 10 percent. until next fall.
– How high the inflation peak will be depends on the new energy tariffs. Those to be introduced next year. Seeing what is coming, companies are already transferring the increases to their clients, Benecki notes.
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Scenario 2. Winter not so cold, crisis not so deep
– If the winter is on average cold, there is likely to be a limited slowdown – forecasts Rafał Benecki from ING Bank Śląski.
That is? It can be done without downtime in factories and without a major slump in the economy. It helps Europe that it has been preparing for a difficult period for some time. The markets have clearly calmed down.
– Gas prices show that the period of the greatest panic is behind us. The rates have already dropped a bit from the absurdly expensive ones we had in the summer. There were many reasons for this – speculation did its job as well. However, European countries have accumulated considerable gas reserves, the magazines are full. It is also possible to find alternative energy sources such as LNG or supplies from the Middle East. At the same time, it can be seen that household demand for gas decreased by 10-20%. – Benecki notices.
– There are also the first signs that the gas market in Europe may balance itself in average weather – adds the economist from ING.
In this scenario, the economic situation will still be difficult. The economy will slow down and prices will rise – because it will not be possible to avoid increases in energy rates.
BNP Paribas experts believe that despite this, the GDP growth in Poland will amount to 3.5 percent. this year, although they previously expected it to amount to 4.5 percent. Next year will be much more demanding. Here, economists expect a rickety 1% increase. According to these forecasts, unemployment will rise, but not dramatically. In 2023, it is expected to amount to 6.1 percent.
Scenario 3. Warm winter and unavoidable crisis
A warm heating season would be the best “gift” for the European economy. Does such a variant mean that we will go through the crisis with a dry foot? – We won’t get through. Orders from our main trading partners are falling sharply, and there is also a decline in purchasing power in Poland – believes Benecki.
In this scenario, factories will not be stopped and energy will not be as expensive as one might expect. However, the crisis is inevitable. Gas, electricity or coal will be very expensive anyway, and the entire economy will feel the costs of fighting inflation. The mere rise in prices will, more and more, absorb our wages. Fortunately, these will continue to grow (by 11.5 percent in 2022 and 12 percent in 2023, as forecasted by BNP Paribas).
Of course, we must not forget about the war in Ukraine and the uncertainty it constantly causes. All this makes economic times difficult for us. Benecki believes that “we are standing on the border in Poland technical recession“and it is unlikely to change – even in the most optimistic one the scenario.
However, in preparing for the crisis, economists point out that we have recently suffered a much more severe economic downturn. – Certainly, the crisis will not be as onerous as the one we dealt with at the beginning of the pandemic – says the chief economist of ING Bank Śląski.
So there will be no sudden shocks or lockdowns freezing large sectors of the economy. However, it is possible to return to remote work in corporations or remote learning in schools – if energy prices are really gigantic. Here, however, the weather is crucial, and meteorologists are not yet able to say how cold this winter will be.
Author: Mateusz Madejski, journalist at Business Insider Polska