Shopping in Poland may become more expensive next year. At least that is what follows from the report of the largest Swiss bank UBS, according to which the Czech koruna will continue to weaken against the Polish zloty next year.
According to UBS strategists, the Polish currency will continue to gain ground, especially against the koruna. The very probable success of the Polish pro-EU opposition led by Donald Tusk increases the probability that “frozen” European money will once again flow smoothly to Poland from Brussels, which is a factor that international investors have been betting on in recent weeks – thus driving the zloty to firmer levels.
The koruna has weakened against the zloty by more than nine percent since the beginning of this year, and according to UBS estimates, a similar scenario should also take place in 2024. From the current level of 5.60 koruna to one zloty, the koruna should fall by another seven percent to six crowns per zloty, i.e. to the weakest level since 2020.
“At the same time, for example, in mid-February this year, it temporarily cost less than 4.95 crowns, according to Bloomberg data. This was the strongest level of the koruna against the Polish currency in modern history,” noted Trinity Bank Chief Economist Lukáš Kovanda. According to him, the strong koruna was one of the reasons for the increase in popularity of cross-border shopping trips by Czechs in Poland.
“Together with, for example, zero Polish VAT on basic foodstuffs or extremely cheap fuel, artificially and politically ordered even more cheaply before the country’s October elections, the relatively weak zloty gave birth to a ‘Polish shopping paradise’,” adds the economist.
At least in terms of fuel prices, everything is “normal” after the Polish elections. Since the parliamentary elections, Polish petrol and diesel have almost caught up with the prices at Czech pumps, and the recent queues of Czech motorists at Polish pumps are more or less a thing of the past.
The current price of gasoline and diesel in Poland is currently around 36 crowns per liter, i.e. about two crowns less than in the Czech Republic. Just a few weeks ago, the difference was more than eight crowns per liter. However, according to experts in Poland, such prices were unsustainable in the long term.
Photo: Trading View, List of Reports
The Polish zloty has been strengthening against the koruna in recent months. A similar scenario should take place next year as well. One zloty should be worth six crowns, which is how much it was last in 2020.
Blocked money
Poland is experiencing live changes after the October elections. If it were possible to depose the current government, which is known for its right-wing and populist direction, Poland could reach for money from the European Union.
Since the Law and Justice (PiS) party came to power, Warsaw has repeatedly been involved in disputes with the European Union. Due to disagreements over judicial reform, which has increased the influence of politicians on the justice system, the country is now unable to draw money from the EU’s recovery fund.
Even if the PiS party received the most votes in the elections, it will probably not be enough to maintain power due to the lack of allies. On the contrary, the opposition parties that have joined together in a coalition have a comfortable majority of seats in the lower chamber of the Sejm.
Although President Andrzej Duda entrusted the formation of the government to the current Prime Minister Mateusz Morawiecki, he has little chance of gaining the confidence of the Sejm. Everything points to the fact that Donald Tusk, the former president of the European Council and leader of the opposition coalition, will become the new prime minister. He promises that he will mend relations with Brussels and that he will strive to unblock money from the EU fund.
Markets are pleased with the development
“Financial markets greeted the election results with great hope and hope for the unblocking of EU funds and greater government predictability in Poland,” eToro analyst Pawel Majtkowski said.
“It could attract more foreign investors who will want to take advantage of Poland’s economic potential,” writes UBS in a report, which is now advising its clients to bet on a significant fall in the koruna and buy the zloty as one of the most profitable investment strategies for next year.
“The prospect of this influx, roughly 900 billion crowns, is strengthening the Polish zloty. The likely new Polish government, led by Donald Tusk, is much more accommodating to Brussels, and the influx of billions of euros in subsidies will boost demand for the zloty. The incoming billions of euros will first of all buy the zloty, which will then be used to finance the relevant investment events and projects in the country,” explains Kovanda.
According to UBS, the zloty will also benefit from the monetary policy of the local central bank, which, although it moved to lower the main interest rate in September and October, left it unchanged at 5.75 percent at the November meeting, even though analysts expected a reduction of a quarter of a percentage point. This decision supported the Polish currency.
