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2021/11/26 / Erste Group Research

Poland Special | Tax cuts to curb inflation?

Government proposed set of tax cuts to lower energy bills for households and tame surging inflation. Proposed measures include lowering of VAT and excise duties on electricity, gas and fuels. Changes are to give central bank more maneuvering space and could slow tightening.

The Polish government proposed a set of tax cuts that will lower energy bills for households in the coming months. The proposed measures include lowering (or eliminating) of VAT and excise duties on electricity, gas and fuels. The changes should be introduced for three or five months starting from the end of December or the beginning of next year. The government estimates that the anti-inflation package will cost the budget PLN 10bn (0.4% of GDP).

The proposed changes will mainly affect inflation rates in 1Q22 such that headline CPI will be lower by around 1-1.5pp compared to the no-policy-change scenario. Hence, inflation will most likely peak already in December 2021 at 7.8% y/y. Compared to the no-policy-change scenario, average inflation should be lower by 0.4pp in 2022 and average 6.0%, while it should be higher by 0.3pp and land at 3.5% in 2023. We stick to our current interest rate outlook and we expect the NBP to raise the key rate by 50bp to 1.75% in December. We see the peak of the cycle at 2.5-3.0% by mid-2022.

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General information

AuthorErste Group Research
Product nameCEE Economies Special Report
Topic in focusFX, Macro/ Fixed income
Economy in focusPoland
Currency in focusPolish Zloty
Sector in focus-


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