Deflation on the case is not dangerous for the Polish economy , photo:
The economist Ryszard Petru, who was a guest of Radio Ones, highlights the main source of deflation: falling food and fuel prices. – It’s not a bad deflation. To bad we have to do when the companies expect that it will be worse in the future and therefore lower prices. Here we have a completely different situation. External factors make the Poles is more money in their pockets.
price index of consumer goods and services in August 2014. compared to July 2014. was 99.6. Therefore, prices decreased by 0.4 percent. month-to-month and 0.3 percent. year to year. Food in the year became cheaper by two percent.
Businesses see it differently
deflation noticeable by consumers we have only two months, but when it comes to business – this is from several quarters.
– Higher demand may, in certain circumstances, compensate the losses incurred by businesses, but generally, in most cases, they have to walk down the prices offered by myself or below the level of profitability, or closer to the border. The price pressure exerted on them is one-sided. Applies only to sales prices, while the cost of purchasing materials and intermediates used for the production, or grow, or fall more slowly than the prices of final goods – says Lukasz Kozlowski, an expert Employers of Poland.
– That has a very negative impact on the financial statements and on the balance of businesses in recent years – he adds. It may also translate into less investment.
– Every industry has a different situation – says Ryszard Petru. – In general, such a deflation, with which we are now facing, is not dangerous for the economy. It is important, of course, how long it will last. If it will take another couple of quarters, it could lead to a situation in which the Poles get used to that prices are falling. Then can be generated inappropriate behavior of entrepreneurs. For now, however, this is more of a temporary thing – says the economist.
How long will the deflation in Poland?
– Factors such as oil and food are difficult to predict, but food prices always fall during the summer. The surprise may just be the scale of the reductions. As time passes, we will see an increase in inflation. Very slowly, it will be returned to the target – Ryszard Petru comments.
Is deflation is ever a problem for the state budget?
According to a radio caller Ones to deflation need to look from two sides.
– On the one hand, deflation is not a problem for the budget, so that consumption is increasing. On the other hand, the nominal income tax especially are lower. The worst in the economy is what surprises us. If so prognozujmy inflation of 1 – 2 per cent., Then we have a zero level, of course, revenues are lower – he says.
highlights also bad for the economy would be deflation resulting from economic weakness. The Polish economy is in the quite well compared to the rest of Europe. Growth fluctuates around 3 percent. – Many European country marzyłby of such dynamics.
The question remains, if the EU investments that fall in the fourth quarter of this year, will accelerate this momentum. Ryszard Petru
believes that budgeted for GDP growth of 3.4 percent. be achieved.
the other hand, does not see the need for swift action Monetary Policy Council consisting of lower interest rates (in the draft budget provides for a reduction of 50 basis points).
However, the opinion of economists on interest rate cuts are divided.
It is the Russian embargo
In the opinion of Peter Bielski, senior economist at BZ WBK, price declines reasons are several, but the most important is the Russian embargo on EU food. In his opinion, chances are that inflation will be below zero by the end of the year. Ban on imports of food to Russia makes it floods the European markets.
– At the same time the production of the world is big this year, and food prices are the lowest in more than four years – he says. Additional
, next to food price deflation are factors contributing to low fuel prices in the world and consumer behavior.
– Demand is not an exceptionally strong. Although consumption in Poland is growing at a moderate pace, but this increase is not so pronounced as to be able to neutralize these low commodity prices and low food prices. As a result, inflation remains at very low levels – explains economist.
Inflation benign consequences
According to the expert, the inflation should not harm economic growth. On the contrary, there is even a chance that might help. If you are mainly due to supply-side factors, namely cheap raw materials and cheap food, the household means that in real terms more we can do. – Even if wages do not rise, then the slightly falling prices, more and more we buy – says the economist.
Meanwhile in Poland, wages are rising, which in total can make that consumption growth will remain at a fairly high level.
zloty can not be too big fluctuations despite the precarious situation in Ukraine. – Gold should remain fairly stable currency, and in the next few or several months, you may even strengthen that favors keeping inflation at a low level – BZ WBK economist added.
Positive impact
Also, Adam Czerniak, chief economist at Insight policy analysis center, who was a guest of the Polish Radio 24, thinks that deflation in the short term may well impact on consumer demand and the entire national economy.
– Short-term deflation can have a positive impact on economic growth, because the lower prices, including us for our consideration, we can buy more. Therefore growing consumption – says the expert. According to the analytical center
Policy Insight, deflation decrease of one percentage point results in a period of 3 – 4 quarters of growth in consumption growth by 0.1 percentage point. – It is not very much, but always for the economy that is not growing too fast, this is a positive impulse – says Adam Czerniak.
Deflation drives deflation
the other hand, the persistence of deflation for a long time could plunge the economy into serious problems.
– If this deflation is long, and what’s more, consumers and investors begin to expect that this fall in prices will continue in the future, then the effect of deflation is different. If we expect that durable goods such as televisions, refrigerators or cars will become cheaper, then buying decisions put off for later, because we know that in the future will be even cheaper – notes guest PR 24
This is obviously harmful to the economy, because in this case, consumption, and investment are falling. – If fewer people want to buy goods, the prices continue to fall and there is a deflationary spiral – says economist. And by the way, as was the case in Japan, comes to economic stagnation.
A negative example of Japan
Sources economic problems of Japan, which was struggling with falling prices for many years and only now has the chance to go straight, look for the real estate market – explains economist.
– Deflation in Japan, in fact the time when prices either fall or remain at the same level, lasts from early 90s then it’s a great economic boom ended abruptly rather large price bubble in the housing market – explains Adam melanoma.
Japan experienced almost zero growth, interwoven with a period of deflation. Only recently, a very wide-ranging policy actions to stimulate the economy, is starting to bear fruit.
Deflation in other countries
Deflation also affected several countries in the euro zone, but it initiated fiscal problems.
– especially the economies of southern Europe experiencing price declines. However, in this case, the genesis of inflation is different than in the case of Japan – indicates Adam Czerniak.
In these countries had to deal with the fiscal crisis and such. Greece and Portugal had to apply for help from other EU countries to finance its budget deficit.
– In these countries, so that they can get a better competitiveness, needed a restatement of goods – explains the expert. And more importantly: the decline of wages, because of the entry of these countries into the euro area – salaries grew there very quickly. When wages and prices fell – also fell consumer demand.
Polish deflation is imported
Unfortunately, the economic problems of the euro area harm Poland, because our current deflation mainly imported from abroad.
– Deflation is with us independent of the monetary policy of the National Bank of Polish and other activities in the country. First of all, most of the import inflation. Cheaper fuel and foods. Very clearly also feel the effect of the embargo on Polish, and not only Polish fruits and vegetables, Russia – adds guest PR 24
to this is the import of deflation from the southern part of Europe.
According to the expert, in this situation, even the expected actions of the Monetary Policy Council, in the form of a reduction in interest rates at the October meeting, they can not stop the decline in prices in Poland. These movements bring because usually the first results after three – four quarters.
Now our economy most can help consumers if they do not put “on then ‘purchasing decisions.
Krzysztof Rzyman, Halina Lichocka, Grazyna Raszkowska
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