The Impact of War in Ukraine
on the Polish Economy (2022)

 The Russian Invasion of Ukraine on 24th February 2022 led to a panic on the global financial markets and it has had an impact on the social and business life of society throughout almost the entire world. A cut price occurred throughout all world economies and the Stock Exchange Market in Warsaw (GPW) noticed the third weakest session in their operations. The stock-index WIG20 decreased by 10.9% and this is the worst result in the history of the GPW as well. Greater falls were observed only in 1997 and 2022. A real crash has taken place on the stock exchange market in Moscow where the stock-index RTS sometimes dropped in value by 48% but by the end of the day reached the level of minus 33%. The stock exchange sessions on Thursday will be consigned to the history of capital markets as the one of their “worst moments”. Nevertheless the war in Ukraine will also have a real impact on the development of economic parameters in Poland:

The main problems for the Polish economy are as follows:

Reduction of the growth dynamics of GDP,

1. More expensive prices and less availability of raw materials

2. Runaway inflation following the raising of interest rates by the Monetary Policy Council

3. Large inflow of Ukrainian refugees to Poland

4. Increased budgetary expenditures and inflow of funds from the EU

5. Raise of the level of public debt

6. Exchange rate

7. Low share of Polish trade in countries involved in the war

8. Possible recession in the United States

With reference to 1)

According to experts from BNP Paribas the decrease of the growth dynamics of the GDP in Poland could be lower by one percentage point reaching 3.5% [1].

However, because of the high uncertainty as to the economic consequences of the war, they see a risk that economic growth this year may be lower due to the slowdown of activities in the Euro-Zone. The increase of the prices of raw materials, a weaker exchange rate and disturbances occurring in the supply chains will additionally fuel high inflation.

With reference to 2)

The prices of raw materials are growing fast, in particular crude oil prices, causing a significant increase of oil costs at petrol stations. If the high prices of raw materials will sustain over a longer period of time, then the buying power of households will suffer causing a decrease of economic growth in this year. The direct impact on the Polish economy, resulting from reduced exports to Ukraine and Russia, should be rather moderate. The share of each of these countries within Polish international sales is not particularly high and last year it was valued at around at 2 – 3%. More disruption may result from import problems. Poland still remains dependent on the export of energy fuels from Russia, although the launching of the pipeline “Baltic Pipe”, connecting our country with gas fields in the North Sea, will increase energy security. Analysts underline that high prices of energy resources and some difficulties with obtaining them will hit Poland not only indirectly but also directly due to a lower level of business activity in the EU which is a key trade factor to our country being responsible for about 75% of Polish export. Russian natural gas covers about 40% of gas consumption in the EU. The leaders of the European states have clearly declared that the purchase of Russian gas will be significantly reduced. To this end, importation will fall by even up to 65% this year. Although from a geopolitical point of view this decision is certainly right, this will have economic consequences. More expensive gas will also impinge on the operative costs of European entities and will reduce consumer demand.

With reference to 3)

The fundamental problem of the Polish economy is soaring inflation. The Main Statistical Office has revised upwards initial data provided on 1st April 2022 [2]. Inflation CPI (Consumer Price Index) reached in Poland in March 2022 for the first time in 21st century a double digit level, i.e. 11% comparing with the analogous month in 2021. This was the highest inflation level since September 2021. Prices went up on a monthly basis even by 3.3% and this was the highest monthly dynamic since January 1996 [3]. Thus the results were higher by 0.1 percentage points than the results estimated and published on 1st April 2022.

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