PIE: Wage growth will not exceed the level of inflation until late 2023.

The decline in inflation will be gradual, starting in the second quarter of this year, making it likely that the chances of real wage levels rising and catching up with inflation levels will not occur until the end of the year, the Polish Economic Institute (PIE) forecasts.

The economic slowdown means fewer chances for increases. Consumers' purchasing power will decline for most of the year. We predict that wage growth will not exceed inflation until late 2023. As a result, the actual wealth of our wallets will decrease, which will translate into both a reduction in consumer spending and a meltdown in the savings we have, PIE's Macroeconomic Monthly reads.

PIE recalls that in 2022, wages in the corporate sector grew at a record pace, starting in February, reaching double-digit levels. The increases were further bolstered by the payment of bonuses and other discounts granted due to rising prices. However, wage growth was uneven across the economy. Particularly large increases, reaching 20%, were recorded in mining and transportation, while wages in services or trade grew at a rate of around 5%.

In 2023, the scale of increases will be limited, and wage growth will be below inflation for most of the year. The economic slowdown will reduce the ability of companies to meet employees' wage demands, and wage growth will be lower in subsequent months. The decline in inflation will be gradual, starting in Q2, making it likely that the chances of real growth in wage levels and catching up with inflation levels will not occur until the end of the year, according to the report.

According to the Institute, the financial situation of households will deteriorate further this year.

Inflation is reducing consumers' purchasing power. The assessment of household budgets has also deteriorated noticeably over the year, according to consumers. More than half of those surveyed estimate that their financial situation has worsened over the year. Pessimistic sentiment among consumers still persists in the economy, as evidenced by the CSO's Current Consumer Confidence Index, which stood at -38.1 points in January this year (down 8.9 points from January 2022), the report further reads.

Source: PIE and ISBnews