Poland’s Inflation Rate Climbs Once Again in April, Reflecting VAT Adjustments and Rising Fuel Costs

According to preliminary data from the Central Statistical Office (GUS), Poland’s inflation rate rose to 2.4 percent year-on-year in April 2024, up from 2 percent in March. This increase is largely attributed to the reinstatement of a higher Value Added Tax (VAT) rate on food and escalating global oil prices, which have impacted fuel costs across the country. “In April 2024, consumer prices for goods and services increased by 2.4 percent year-on-year,” reported GUS, indicating a modest uptick in inflation rates as the country contends with economic fluctuations.

The rise in inflation was particularly noted in food and non-alcoholic beverages, which saw a price increase of 1.9 percent over the year. Energy carriers, however, decreased by 2.3 percent, while fuel prices for private transportation fell by 1.2 percent year-on-year but rose by 2.1 percent from March to April. The reintroduction of a 5 percent VAT rate on food significantly influenced these figures. Analysts from ING Bank Śląski assessed the situation, noting, “The inflation low point is behind us,” and predicting that core inflation, excluding food and energy, would stabilize around 4 percent in the coming months.

Analysts’ Perspectives and Future Projections:

Experts from the Polish Economic Institute linked the April inflation increase primarily to food prices due to the VAT rate restoration. “Inflation rose to 2.4 percent in April, mainly due to food prices – this reflects the return to a higher VAT rate. Fuel prices also rose due to more expensive oil on global markets. Against this backdrop, core inflation continued to decline – the index fell to 4.2 percent,” they explained. The forecast from the Polish Economic Institute suggests that “the second half of the year will bring even higher inflation – mainly due to energy prices and services.”

Economic outlooks remain cautious as analysts from major financial institutions like PKO BP and mBank anticipate further increases in inflation. “CPI inflation in April rose to 2.4 percent year-on-year from 2.0 percent in March. A slightly lower than expected result is thanks to food prices, which in monthly terms increased by ‘only’ 2.1 percent amid the return of the 5-percent VAT rate. The data indicate that the spread of the price increase over time is even stronger than we initially assumed,” stated analysts from PKO BP. Analysts from mBank added, “What surprised us? Low energy (-0.2 percent month-on-month) and core inflation +4 percent (+0.6 percent month-on-month). Core inflation on a seasonally adjusted basis is still +0.3 percent (annualized ‘beyond the target’). The declines in goods prices are ending. Soon, the ‘sediment’ that, along with the recovery, will push this measure of inflation back towards 0.4 percent month-on-month will reveal itself entirely.”