What is inflation, the level of inflation
Inflation is a process of an increase in the average price level caused by a decline in the purchasing power of domestic money. It is measured by comparing the prices of basic products from a given month with the previous one. It is natural that in a developing economy, money loses value in relation to the goods and services that can be purchased with it. It is important, however, that this loss is not too great. Perfect 0% is not feasible, but values up to e.g. 2% are still acceptable. Above that, inflation can get out of hand and act like a growing rolling snowball. Our Polish inflation-snowball is already a bit accelerated as in the picture below. For the entire year 2021 it was 5.1%, but these statistics are underestimated by what was at the beginning of the year. In January 2021, we only had 2.6%. In December … see for yourself:
The impact of rising inflation on the average person
Imagine that you go to the shop on Tuesday and pay twice as much for the same basic food shopping as on Monday. I have redrawn the situation to explain the phenomenon, but such situations have actually happened and are happening in the world. In Venezuela, inflation exceeds hundreds or even thousands of percent (it is called hiperinflation). A little older remember a similar situation in Poland in 1988-89. It’s not that bad these days, but the inflation snowball is gaining momentum all the time. The average person sees rising prices and stagnant payoff. So he has to work more and combine to earn more or live more and more modestly.
Reasons for rising inflation in Poland and Beyond
Currently, it is not only a Polish problem. Inflation is also high in Western European countries, but not as high as in Poland. Rising gas and fuel prices resulted in higher costs of transport, production, etc., not only in Poland. The effects of the pandemic, which in Poland were additionally artificially postponed by various financial aids that Poland could not afford. Late reaction by raising interest rates. A policy of giving away money, resulting in increasing and new Polish taxes and fees. New emission fees from the EU are hitting Poland hard, which puts too little emphasis on reducing greenhouse gas emissions. Polish policy of inhibiting the development of renewable energy sources. All this gives us the above-mentioned 8.6% and further not very positive forecasts.