Poland's government has proposed a record rise in the national minimum wage. Economists are worried it could exacerbate double-digit inflation.
The ruling Law and Justice party announced plans last week to increase the current monthly minimum wage of 3,490 zloty to 4,300 zloty in July 2024."In our view, to bring inflation down to the target requires a decline in the wage growth rate below 5% YoY and a paradigm shift in economic policy, i.e. less consumption and more investment," Rafal Benecki, chief economist at ING Poland, said.
The government is seeking a third term in office, an unprecedented feat in Poland's democratic history, as the country heads to the polls this fall. The latest polling gives the PiS a slim lead over the KO fronted by former European Council President Donald Tusk. National Bank of Poland Chairman Adam Glapinski suggested earlier this month that the Monetary Policy Council may look to cut interest rates later this year if price rises slip to single-digit levels.
"In our view, this will translate into continued double-digit growth in average wages in the economy, keeping core inflation elevated," Benecki said. "In our view, to bring inflation down to the target requires a decline in the wage growth rate below 5% YoY and a paradigm shift in economic policy, i.e. less consumption and more investment," Benecki said.
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