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    Memorandum of the Union of Entrepreneurs and Employers: in light of the dramatic increase in operating costs, we need a set of laws for micro-enterprises

    Posted on by Weronika Marzec

    Warsaw, 9th February 2023

     

    Memorandum of the Union of Entrepreneurs and Employers:
    in light of the dramatic increase in operating costs, we need a set of laws for micro-enterprises

     

    Overview:

    • Polish entrepreneurs have been struggling with numerous crises and skyrocketing operating costs since 2020. This impacts directly their financial situation. In 1Q 2022, 161 thousand companies suspended business activity, while 104.3 thousand shut it down.
    • This year, Polish companies await further increases in energy prices and other operating costs, as well as a further, second in a row, minimum wage increase.
    • The smallest companies run by micro-entrepreneurs have found themselves in a particularly difficult situation. If we want to avoid a wave of bankruptcies, we need a package of solutions to improve the financial situation of micro-enterprises.
    • The problem of flat-rate social security premiums excessively burdening the smallest of companies can be solved by eliminating the time restrictions on the so -called “little ZUS plus”. Indexation of the income threshold entitling to take advantage of preferential conditions should also be taken into consideration (presently it amounts to PLN 120,000).
    • In order to reduce non-wage labour costs for micro-enterprises, we suggest exempting them from the obligation to pay premiums to the Labour Fund, as well as a reduction by half of the amount of pension premiums paid by micro-enterprises for their employees.
    • Further changes in the regulations introduced with the “Polish Deal” ought to be considered. We suggest the health premium micro-enterprises be reduced from 9% to 6%, while the limits and amounts of deductible contributions from income in the case of taxpayers settling with flat tax and a lump sum on registered revenues be increased.
    • We also suggest that in the case of employees employed by micro-enterprises, the sick leave be paid from the first day the employee’s inability to work.

    Introduction – a hard time for Polish companies

    Recent years have not been easy for Polish entrepreneurs, the smallest companies of the SME sector in particular. The COVID-19 pandemic was first to pose a serious threat, along with the restrictions that followed. It led to numerous enterprises being shut down, while those that survived oftentimes struggled with financial liquidity. The situation was further aggravated with the largest tax law amendment in years: the new Polish Deal. The provisions therein were ill-considered and harmful, and thus led to immense chaos among entrepreneurs, accountants, and the tax authorities alike. Despite the fact they were largely improved over the fiscal year, 1Q 2022 was a period of high uncertainty for Polish businesses, and even now plenty of tax norms raise questions – and for good reason. Moreover, 2022 was a time of skyrocketing gas, electricity, and fuel prices. In many cases, there were multiple increases for entrepreneurs. This, of course, was associated with considerable inflation, especially after the Russian invasion of Ukraine in February 2022. The war was also meant disrupted supply chains (a problem already since the pandemic). The inflationary spiral also translated into an increase in wages, and thus in 2023 we are dealing with a record-high increase in minimum wages and social security premiums for entrepreneurs. All this converts into a substantial increase in operating costs. Recent years have undoubtedly been extremely difficult for Polish entrepreneurs, for SMEs in particular.

    Statistics reflect the problems signalled above. The Ministry of Development and Technology stated that 161 thousand companies suspended business activity in 1Q 2022, whereas 104.3 thousand shut it down (nearly 29% more than in the same period in 2021). Furthermore, as many as 69% of entrepreneurs believe that the conditions for doing business deteriorated in 1Q 2022 [1]. The data also indicate a highly disturbing fact: presently close to one in seven companies, one in six among micro-enterprises, have suspended operations[2]. Many companies will never return to the market and will be removed “ex officio” from the registry of CEIDG (the Polish Central Registration and Information on Business).

    Other data suggest that from the beginning of January 2022 until the end of October last year, CEIDG received 157.7 thousand motions to terminate sole proprietorship – 17.1% more than in the same period in 2021[3]. At the same time, CEIDG received 278.1 thousand motions to suspend sole proprietorship – 31.1% more than in the same period a year before[4]. Polish companies are ever more often forced to shut down operations and urgently need help, not through direct subsidies, but systemic changes that will help reduce the costs incurred by the smallest entities operating on the market.

    An aid package for the Polish SME sector

    1. “Relief to start” & “Small ZUS”

    Among benefits for new enterprises, there are three of major importance: “Relief to start”, “Small ZUS” and “Small ZUS+”. New entrepreneurs (or resuming operations after 60 calendar months from their last suspension or shutdown) can benefit from a relief for starting the company for 6 full calendar months. During this period, they do not pay social security contributions (however, they still have to pay health insurance).

    The second solution is called “Small ZUS”. It allows new entrepreneurs in a full period of 24 months from starting their business or making use of the “Relief to start” to pay social security contributions in a preferential amount. By default, contributions are paid from a declared base not lower than 60% of the forecast average gross salary, whereas in the case of “Small ZUS”, the basis may be an amount not lower than 30% of the minimum remuneration. The amount of the premium for individual insurance is an appropriate percentage of the declared basis, for instance: pension insurance in the case of “Small ZUS” in the lowest amount will amount to 19.52% multiplied by 30% of the minimum wage.

    It is possible to make use of preferential ZUS contributions as part of the “Small ZUS+” programme aimed at companies that obtained revenues maximum PLN 120,000 the year before. They can make use of the same benefits as in the case of “Small ZUS” for a maximum of 36 months in the next 60 calendar months of conducting business activity. Importantly, the time of using the small ZUS is also included in this period. Therefore, in most cases, this program allows you to extend the small ZUS by an additional year.

    PROPOSED SOLUTION

    The Union of Entrepreneurs and Employers proposes to eliminate time restrictions for the possibility of taking advantage of the “Small ZUS” programme.

    JUSTIFICATION

    The “Small ZUS” programme helps new companies in their initial period of operations, when most of them try to scale up, build a customer base and capital necessary for further functioning. This is a very beneficial solution that facilitates difficult beginnings. Nevertheless, there is a very large group of companies on the market that even at a later stage do not get high revenues. These are usually sole proprietorships, craftsmen or small commercial companies. Many of these people value independence and do not want to work “full-time”. They are devoted to their passions, making them their profession. Moreover, many companies that usually obtain higher revenue have temporary financial difficulties, caused, for example, by a decrease in the number of projects. Unfortunately, these entities can only benefit from preferential conditions for a limited time according to the rules of “Small ZUS” and “Small ZUS+”. When they have to start paying insurance contributions in full, it often turns out to be impossible, because after paying fees and taxes from the revenues obtained, only a small amount remains, which does not allow them to support themselves and their families.

    This problem has become particularly evident in recent years. Initially, the COVID-19 pandemic was a considerable blow in a major way to the smallest entrepreneurs, who had no sufficient capital to survive trying times, let alone pay public levies and taxes. The previous year, on the other hand, was characterised by inflation and massive increases in operating costs in the form of prices of gas and electricity or rental costs to name a few. In 2023, there has also been a record increase in social security premiums, which are, after all, related to average salaries and wages. Therefore, in order to enable economic activity also for these entities, we propose that the “Small ZUS” programme have no time constrictions. We postulate that entrepreneurs ought to be able to decide each month whether they can afford to pay premiums only from the base amounting to 30% of the minimum wage, or whether they can afford to pay a higher contribution.

    1. Reduction of the disability pension paid by micro-enterprises

    One of the social insurances that is a heavy burden for employers is disability insurance. The premium amounts to a total of 8% of the base and is paid by employees in the amount of 1.5% and by employers in the amount of as much as 6.5%.

    PROPOSED SOLUTION

    The Union of Entrepreneurs and Employers proposes to reduce the disability pension premium paid by micro-entrepreneurs for themselves and for their employees by half (to the level of 3.25%). The other half of this premium could be reimbursed from public funds.

    JUSTIFICATION

    Employers pay 6.5% of the disability pension premium on behalf of their employees. For the smallest companies, this is a very large amount, which considerably increases labour costs. Considering the amount of the minimum salary in February 2023, a monthly premium per single employee amounts to approx. PLN 225. In the case of the average salary in the enterprise sector in December 2022 (PLN 7,329.96), the disability pension premium paid by entrepreneurs for their employees comes up to as much as PLN 475. Lowering the disability pension premium will significantly reduce employment costs. Especially since in the case of even the lowest salary, which currently amounts to PLN 3,490, the employee receives a net amount slightly above PLN 2,700, while the employer’s total cost exceeds PLN 4,200. Therefore, in the case of even the minimum wage, the state receives approx. PLN 1,500 per month in the form of various premiums and taxes.

    1. Premiums to the Labour Fund and the Solidarity Fund

    In recent years, operating costs have been growing drastically. In 2023, entrepreneurs’ social security contributions increased at a record-breaking level, payments for utilities, such as gas and electricity, are rising as well, as are rental costs. Both the minimum and the average wage are on the rise. All this translates into ever larger difficulties with maintaining financial liquidity by the smallest entities. A solution partially mitigating the increase in costs may be to waive the collection of premiums to the Labour Fund and the Solidarity Fund from micro-enterprises.

    PROPOSED SOLUTION

    The Union of Entrepreneurs and Employers proposes to abolish the obligation to contribute to the Labour Fund and the Solidarity Fund for micro-enterprises.

    JUSTIFICATION

    Operating costs, which are growing year-to-year, make it impossible for many of the smallest enterprises to stay on the market. Others require capital so that they can carry out further investments and consequently develop. Relieving entrepreneurs of costs related to premiums to the Labour Fund and the Solidarity Fund will allow the smallest companies to develop and, as a result, will stimulate the Polish economy. We emphasise that this proposal of ours applies solely to the smallest micro-enterprises. This solution is therefore designed with the most vulnerable entities in our economy in mind. One should also stress that contributions to the aforementioned funds are paid only by entrepreneurs, and not the employees.

    1. Lowering the health insurance premium for the self-employed and micro-enterprises

    One of the most controversial changes introduced in the Polish Deal regarded health insurance regulations. The new solutions do not allow companies to deduct health insurance premiums according to the same rules as in 2021. Therefore, a significant part of the benefits resulting from the introduction of a higher tax-free amount or the increased tax threshold is squandered.

    PROPOSED SOLUTION

    The Union of Entrepreneurs and Employers proposes that in the case of micro-enterprises and people who are self-employed, the health insurance premium be reduced from 9% to 6% if using tax scale. We also propose to increase the limit of reducing the tax base in the registered lump sum to 75% and to increase the amount that can be deducted from the tax base (income) to PLN 14,000 of the value of paid health insurance premiums in the case of flat-rate tax.

    JUSTIFICATION

    Costs related to health insurance for the self-employed and the smallest enterprises constitute often a rather large part of their budgets. During times of very high inflation and operating costs going up, it seems reasonable to enable the smallest entrepreneurs to reduce these costs.

    1. A change in the rules for paying sickness benefits

    Employees who are unable to work are entitled for the first 33 days to a so-called “sick pay” paid by their employers. It is only from the 34th day onwards that “sickness benefits” are covered by the Social Insurance Institution (ZUS).

    PROPOSED SOLUTION

    The Union of Entrepreneurs and Employers proposes that from the very first day of inability to work, people employed in a micro-enterprise be entitled to sickness benefits.

    JUSTIFICATION

    Since the vast majority of employees’ absence from work takes place due to illnesses that last less than 33 days, the costs of sickness benefits are mostly charged to entrepreneurs, and not the Social Insurance Institution. This is despite the fact that employees pay appropriate sickness insurance amounting to as much as 2.45% of the contribution assessment base. Many of them will never take advantage of sickness benefits throughout their professional careers, but only of sick pay.

    Summary

    The Union of Entrepreneurs and Employers presents these proposals in the hope of starting a broad public debate on the current social and health insurance system, which inhibits entrepreneurship and impacts the smallest companies on our market. The economic situation of our country, which has been struggling with constant crises over the past three years, significantly affects the SME sector, micro-enterprises in particular. Countless statistical data confirm this argument indicating that growing numbers of entrepreneurs are forced to suspend or shut down business operations. The total cost of implementing all the postulates listed in this document is estimated at approx. PLN 20-25 billion annually. This would be real help for the smallest companies in Poland. We fear that the lack of decisive action may result in streets full of empty shop windows and abandoned premises, and thus a serious crisis in Polish micro-entrepreneurship.

    ***

    [1] https://www.money.pl/gospodarka/firmy-zwijaja-zagiel-dramatyczne-dane-6835208485485248a.html (accessed on 1st February 2023)

    [2] https://forsal.pl/biznes/firma/artykuly/8641001,jednoosobowa-dzialalnosc-gospodarcza-koszty-prowadzenia-w-polsce-raport.html (accessed on 1st February 2023)

    [3] https://www.money.pl/gospodarka/kryzys-uderzyl-w-male-firmy-masowo-sie-zamykaja-z-miesiaca-na-miesiac-jest-gorzej-6850203369155392a.html (accessed on 1st February 2023)

    [4] https://www.infor.pl/prawo/gmina/dzialalnosc-gospodarcza/5638794,jednoosobowe-firmy-likwidacja-2022-prognozy-2023.html (accessed on 1st February 2023)

     

    See more: 09.02.2023 Memorandum of the Union of Entrepreneurs and Employers in light of the dramatic increase in operating costs, we need a set of laws for micro-enterprises

    Appeal of the Union of Entrepreneurs and Employers to Senators of the Republic of Poland with regard to the “10H Act”

    Posted on by Weronika Marzec

    Warsaw, 14th February 2023

     

    Appeal of the Union of Entrepreneurs and Employers to Senators of the Republic of Poland
    with regard to the “10H Act”

     

    Considering the high demand for green energy in Poland, the Union believes that any and all decisions limiting the development of RES constitute a squandered opportunity for our country for numerous new investments, jobs, and a competitive advantage in the CEE region.

    The change of wording in the amendment to the act on investments in wind farms and some other acts of the minimum distance of wind farms from buildings from 500 to 700 metres considerably limits the potential of onshore wind energy in the decade to come.

    The Union of Entrepreneurs and Employers closely monitors the legislative process with regard to the amendment of the act on investments in wind farms, which is intended to restore investment opportunities in this field. Time and again, we have indicated the rising green energy deficit in Poland, threatening the functioning of companies exporting their products to EU markets. Onshore wind farms are nowadays the cheapest source of electricity, as well as an investment-effective source of green energy. In our view, the several years long delay in amending the act that would allow for renewed investments in onshore wind energy in Poland to be highly unfavourable for the entire Polish economy.

    As part of the first reading of the draft amendment, during a joint meeting of the Sejm Committee for Energy, Climate and State Assets and the Sejm Committee for Local Government and Regional Policy, a significant change was introduced to it, aimed at increasing the minimum distance at which a wind farm may be located in relation to the residential development from 500 to 700 metres.

    One ought to emphasise that the presented draft is a long-awaited legislative initiative, and the solutions included in it are the result of many years of cooperation and consultations with the involvement of a wide range of stakeholders, among them representatives of local governments, NGOs, the manufacturing sector, representatives industry, local communities etc. The solutions developed in the course of said legislative process lasting almost two years constitute a broad compromise, optimally reconciling the interests of various parties.

    Ensuring green energy availability in the years to come will directly determine how competitive Polish economy is going to, while being a condition for future investments in Poland.

    A large part of enterprises running their operations in Poland export their products, among others, to European markets. In the case of the furniture and automotive industries, it is approx. 80%. It is expected that all exports, including from the above-mentioned sectors, will have to be produced using low-carbon energy sources by 2026. Considering the current industrial consumption of electricity by the industry at the level of approx. 55 TWh annually, it will be necessary to provide 35-40 TWh of green energy a year for export needs. This, owing to investment opportunities and time required to develop manufacturing projects, can only be executed through the development of onshore wind energy and large-scale photovoltaic installations.

    Increasing the distance from 500 to 700 metres also negatively impacts the functioning of communes themselves, limiting their ability to build residential facilities in the vicinity of existing wind farms. Hampering the development of wind energy also means limiting revenue streams for municipalities from property tax or other public levies related to investments carried out in the area of onshore wind farms. Local communities are also among the first potential groups to benefit from lower energy prices.

    The above conditions were remarked on by the draft’s initiators as part of the Regulatory Impact Assessment (hereinafter referred to as “RIA”), wherein numerous benefits resulting from the entry into force of the new regulations were elaborated on in detail, such as:

    • significant impact on the finances of enterprises in the following sectors: construction, consulting, and design (revenues of enterprises, according to the RIA, would amount to PLN 12.5-20.9 billion), new jobs (the removal of the above-mentioned administrative barriers would allow for development of onshore wind energy to 22-24 GW by 2040 with up to 42,000 jobs may be created related to the sector),
    • additional revenues from property tax (in a cautious scenario, communes where wind farms will be located may obtain a total of over PLN 670 million from property tax alone, while in an optimistic scenario this amount may exceed PLN 1.1 billion),
    • lower electricity prices on the wholesale market (in a scenario assuming a total installed capacity in Poland at the level of approx. 22 GW, total annual savings in energy costs may amount up to PLN 22 billion),
    • providing cheap, zero-emission energy to energy-intensive companies (from the perspective of large enterprises, onshore wind energy in particular shows potential for development in direct long-term corporate power purchase agreements from RES (known as cPPAs), indicated, among others, in the Polish Energy Policy 2040, concluded directly between RES suppliers and recipients of large amounts of energy)[1].

    In the RIA, it was clearly emphasised that positive effects of regulatory changes elaborated on in detail in this document were based on specific parameters contained in the draft act. The most important of them is the mechanism for determining the minimum distance from residential buildings for locating onshore wind farms. Any and all modifications to this mechanism, in particular affecting its essential parameter, which is the permissible minimum distance, will considerably impact the effects of said regulations and thus make the benefits referred to in the RIA unattainable.

    The change in question, that is, a minimum distance of 700 instead of 500 metres, will significantly reduce the generation potential of the RES sector. Considering the high productivity and cost-effectiveness of energy generation, as well as the relatively short period required to execute projects, it is the optimal answer to the energy crisis and is of fundamental importance from the point of view of industry operating in Poland.

    From the analyses of the Union of Entrepreneurs and Employers and many industry organisations, it is clear that in the case of planned projects in areas with the type of residential development that is dominant in Poland, increasing the minimum distance to 700 metres will lead to a reduction in the original assumptions regarding the number of turbines and thus the installed capacity of projects, ranging from 60 to 85%. As a consequence, the vast majority of new wind projects will not be built at all or will be greatly reduced.

    One should also note that the change increasing the distance from wind turbines from 500 to 700 metres will significantly limit the investment potential in rural areas.

    Considering the data presented in the RIA, limiting the development potential of the onshore wind energy sector will clearly be unfavourable for local governments, entities in the supply chain for the sector, the construction industry, and the Polish energy-intensive industry, which, due to the limited availability of cheap zero-emission energy, is already facing the need to reduce employment.

    Regardless of the above, it must be emphasised that this change, apart from the obvious reduction of the benefits described above, will also be negatively perceived by locally communities living in areas where investments in the field of wind farms are being planned.

    It should also be stressed that the change in question stands in clear contradiction to the main goal of liberalising the rules for wind farm location, in process since mid-2021, which from the very beginning was to ensure the greatest possible authority of local governments and communities in the planning process, in the spirit of the principle of subsidiarity of power. Increasing the minimum distance significantly reduces the possibility of real influence of local communities on this process, imposing a rigidly defined framework for the development of the onshore wind energy sector.

    With all the above in mind, we appeal to the Senators of the Republic of Poland to introduce provisions aimed at restoring the original assumptions of the project, that is, the possibility of locating wind turbines no less than 500 metres from residential buildings in order to avoid a number of the described negative effects resulting from undermining the compromise developed in a long-term process, carried out among a wide group of stakeholders. One must stress that the mentioned minimum distance of 500 metres was recommended in the 2022 report by the Environmental Engineering Committee of the Polish Academy of Sciences “Wind power plants in the human environment”, co-authored by 37 scientists, members of the Polish Academy of Sciences. As part of their work, thorough field measurements of the impact of wind farms on the environment were carried out.

    ***

    [1] All and all data provided in this paragraph are obtained from the Regulatory Impact Assessment presented in the Sejm Paper No. 2938

     

    See more: 14.02.2023 Appeal of the Union of Entrepreneurs and Employers to Senators of the Republic of Poland with regard to the “10H Act”

    Opinion of the Chief Economist of ZPP – summary of 2022 and prospects for 2023

    Posted on by Weronika Marzec

    Warsaw, 7 February 2023

     

    Opinion of the Chief Economist of ZPP – summary of 2022 and prospects for 2023

     

    The year 2022 could be called interesting, in the sense in which the Chinese use the curse “may you live in interesting times”.  The beginning of the year brought concerns about inflation (although even pessimists predicted a peak in consumer inflation of approximately 10% year-on-year).  It was supposed to be influenced by the rising prices of energy raw materials and the rebound in the Polish and global economies after the pandemic.  This rebound started in 2021, but many forecasts, especially those from 2021, indicated its continuation in the following months. This, in turn, was expected to affect prices.

    Even before the aggression against Ukraine, Russia began to apply a policy of a limited supply of energy resources to Europe. This was possible due to the dependence of European countries on Russian gas (supplied via pipelines, which meant that there were not many stimuli to change the supplier; in fact, Europe’s dependence on Russian gas has been deepening, not weakening, as a result of German policy in recent decades), oil ( flowing through the Przyjaźń oil pipeline – again, there is no cheaper and easier form of import, hence Central European countries, in particular, were dependent on Russian supplies) and its distillates (especially diesel oil was imported to Europe in significant quantities). The beginning of the year also brought the last significant wave of COVID, during which the government still tried to apply restrictions limiting mobility. 

    At the same time, hopes for the sustainability of a post-COVID economic rebound in the conditions of logistical issues (due to COVID, or rather anti-COVID policies) made us think with concern about the length of the aforementioned inflation impulse.  It was supposed to be caused primarily by excessive demand in relation to the production capacity of companies struggling with rising costs and supply disruptions.  Optimists; however, expected another year of stable economic growth and a slowdown in inflation after the expiry of the pandemic state aid.

    The Winter Olympics in Beijing, which took place in February, were supposed to be a symbol of the success of China’s “zero COVID” policy and the effectiveness and agility of Chinese foreign policy.  The Olympics venues were often closed to spectators, who were few in number anyway – foreigners had virtually no chance to enter China for health and hygiene reasons.  Despite this, the following months showed that the Chinese pandemic was an even greater failure than the European one. Subsequent lockdowns slowed down the recovery of the economy, and the end of the year brought a relaxation of that policy (probably due to the economic situation and growing internal unrest) and a rapidly growing wave of the pandemic. Its scale is difficult to assess due to the censorship of information by the Chinese authorities. China’s efforts to organise the Olympics in times of peace were only partially successful – it may have postponed the date of Russia’s invasion of Ukraine – but only by 2 or 3 weeks … The year of the Chinese Olympics will not be remembered as a year of peace, at least in the West.  However, China and its policy must be remembered because, as it turned out at the end of the year, the Chinese accidentally threw a life belt to Europe in the middle of an energy crisis.

    And this crisis began at the turn of February and March, when, as a result of Russia’s invasion on Ukraine, the EU launched a policy of sanctions limiting imports of energy resources. A similar policy of limiting exports by Russia became an offset to the above. Later on, the size of future supplies was affected by the explosion of the Nord Stream gas pipeline: since it was temporarily closed anyway, its impact was negligible; however, it called into question the possibility of a rapid return to a business-as-usual policy with Russia.  The concerns about supplying Europe with energy resources, which are crucial especially in winter (when RES efficiency is often negligible), led to an increase in the prices of natural gas and oil on regional and global markets. This, in turn, translated into an increase in the prices of fuel and energy – one of the two drivers of inflation, which turned out to be much higher than anyone had expected, not only in Poland but almost everywhere in Europe and, more broadly, in the world. Europe’s energy problems; however, were largely resolved thanks to the supplies of liquefied natural gas. At the end of the year, it turned out that the increase in those supplies was made possible mainly by the collapse in demand in China. There were two reasons for that collapse – the aforementioned policy of shutting down the economy and, to some extent, the increase in supplies from Russia (which was trying to find buyers for its hydrocarbons).  In 2022, the driver of inflation was also the fiscal policy of the previous years. Thee successive measures to support citizens and businesses resulted in an increase in debt in European countries and also in excessive money issuance.

    The increase in energy prices in Europe affected the condition of some manufacturing industries, especially energy-intensive ones,  e.g.,  BASF moved most of its chemical production from Europe to the USA. It also affected the situation of households, which had to and still have to face a sharp increase in energy and fuel prices. On top of that, rising prices fueled inflation and, consequently, consumer prices in Europe are 15-25% higher than two years ago.

    The following months brought an increase in tension in Ukraine: the Russian offensive, which collapsed, Ukraine’s counter-offensive in the autumn, and finally, the new tactics of Russian attacks on civilian critical infrastructure facilities. It was not until late autumn that the situation stabilised. It is worth mentioning that the assistance of NATO countries played a key role in terms of Ukraine’s combat capability and ability to wage the war against Russia.  Poland remained one of the leaders of that assistance throughout the year.

    The war also triggered a massive wave of emigration from Ukraine, which I have already written about. Approximately 1.5 million new emigrants from Ukraine stayed in Poland, either for a shorter or longer period of time.  Some of them decided to bind their fate to the Republic for a while, taking up work here, setting up businesses and sending their children to school.  This is almost 1 million people who still remain in Poland, have valid PESELs, and will potentially rejuvenate the population and replenish the labour force.

    At the same time, after the summer price rallies, fuel and energy prices stabilised. With storage facilities full and supplies secured, prices began to fall back to the pre-war levels towards the end of the year.  The falling prices further fueled growing fears of a recession, possibly global in scope.  Especially since strained supply chains, risks related to the uncertainty associated with the course of the conflict and the carelessness of economic policies during the COVID period are also conducive to that.

    Inflation triggered a response from other central banks; therefore, a cycle of solid increases in interest rates, not seen for a long time, was noticeable both globally and in Poland this year – the time of zero cost of capital is over, at least for now.  This, in turn, began to translate into the cost of servicing debts, private ones – such as housing loans in Poland – and public ones.  In the autumn, the increase in UK bond yields (meaning a drop in market valuation) threatened the stability of the market and the UK pension system so much that it prompted a multi-billion dollar liquidity intervention by the Bank of England. During the same period, the Polish government refrained from issuing PLN bonds due to the compensation expected by the market for borrowing capital. It was replaced by issuing dollar-denominated debt – much cheaper but exposed to currency market turbulence.

    And those turbulences were serious.  On the main EUR-USD currency pair, annual volatility reached several dozen per cent. EUR fell 20% against USD in the period from January to September, and then strengthened by 10%.  The volatility of peripheral currencies, such as PLN, was even greater.  This volatility, as many times before, protected Polish exporters but, at the same time, had a negative impact on energy prices and the situation of not only importers but also foreign currency borrowers.

    At the end of the year, the situation in the world and in Poland became stable.  However, the last 12 months led to a deterioration of the situation of Polish entrepreneurs (inflation, the wage-price spiral and especially rising energy prices played a key role here) and even more serious problems for consumers. For the first time in a very long time, real wages fell due to inflation, while the cost of living skyrocketed.  The reduction in consumption (also evident through the fall in lending) is more and more painfully felt by entrepreneurs. One can only hope that the worst is over, although this is not certain.

    With regard to Polish politics, which is worth mentioning at the end, the most important issue in the field of economy, apart from disputes over inflation and interest rates, was the matter of the National Recovery Plan – the EU funds allocated for the post-COVID recovery of the economy, the transfer of which the European Commission made conditional on the Polish government achieving a number of milestones.

    The year 2022 was so interesting that it remains only to wish that the upcoming 11 months of 2023 will be at least as peaceful as January.



    Dr hab. Piotr Koryś
    Chief Economist of ZPP

     

    See: 07.02.2023 Opinion of the Chief Economist of ZPP – summary of 2022 and prospects for 2023

    Slightly better business sentiment – The Busometer ZPP for the first half of 2023

    Posted on by Weronika Marzec

    Warsaw, 9 February 2023 

     

    SLIGHTLY BETTER BUSINESS SENTIMENT
     The Busometer ZPP for the first half of 2023

     

    Business sentiment for the next six months has improved slightly; however, it remains significantly pessimistic. The overall value of the BUSOMETER sentiment index in companies was 36.4, while the index was 32.4 in the previous research period.

    As Cezary Kaźmierczak, the President of the Union of Entrepreneurs and Employers, noticed: “Entrepreneurs are reacting cautiously to the signals coming from the market.” So far, the gloomy scenarios forecasted last year have not materialised; however, there are still no clear signs of recovery.  The result is a more optimistic mood, compared to that from the last few readings; however, it is still far from enthusiasm.”

    As it was the case in the second quarter of 2022,  entrepreneurs positively assess the situation on the labour market (currently 53.1 compared to the previous 51.6).

    “This confirms that the labour market in Poland is in a stable and good condition at the moment – there is low unemployment and employers are unlikely to consider downsizing” – noticed Cezary Kaźmierczak commenting on the results of the study.

    The value of the sentiment index in the context of the economic situation increased quite significantly (from 27.9 to 35.1). The index can still be described as a “crisis”; however, its increase shows that some entities see prospects of an economic rebound on the horizon in the perspective of the next six months. However, the fact that as many as 58% of entrepreneurs believe that the economic situation will deteriorate further in the coming months cannot be ignored.

    The only component of the index that has not increased from the previous study is the investor sentiment index (it is 24.1, as it was six months ago).

    As the ZPP President clearly noticed: “There is a certain risk that we will be stuck in persistent and long-term inflation, which will prolong the period of slowdown, and the lack of prospects for recovery from that phase will block investment attempts in the corporate sector.”

    METHODOLOGY AND DESCRIPTION OF THE STUDY

    The Busometer ZPP – the SME Economic Sentiment Index, is an indicator showing the degree of optimism of small and medium-sized enterprises and their planned activities in the perspective of the next six months. The Busometer has been published by the Union of Entrepreneurs and Employers in cooperation with Maison Research House every six mothn since 2011.

    The Busometer Index value is influenced by three components:

    • the economic situation,
    • the labour market (remuneration and employment),
    • investment. 

    The value of each component ranges from 0 to 100.  The Busometer scores below 50  indicate pessimistic business sentiment, while scores above 50 indicate optimism.


    See:     9.02.2023 Busometr: Prognosis for the first half of 2023

     

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