Friday, 7 January 2011

Rising Cost of Living

During the past couple of years the government's message has been that Poland was largely unaffected by the economic crisis and is a 'green island' in a sea of red. While it has not suffered the GDP decline of many other European countries, it has been far from untouched by the changing economic climate. In this 'post-crisis' period people are now seeing their living standards fall as costs rise while salary growth has slowed or in some cases even declined.


This has been exaggerated by the government's decision to make poor and average earners cover the costs of the growing budget crisis. This was most blatantly revealed when the government decided to raise VAT by 1% this year, while leaving the regressive income tax policies introduced by the PiS government untouched. Also the only country that has a lower corporate income tax in the EU than Poland is Ireland - hardly an economic model for emulation.


Therefore from January 1st VAT for electronic equipment, transport, building materials and petrol has gone up from the already high 22% to 23%. VAT for food products will increase to 5%, and for books from 0% to 5%. Also, in line with EU regulations, the government is hiking the VAT rate for children's shoes and clothes from 7% to 23%.


Combined these rises are adding a huge new burden on the Polish consumer, with the price of food, consumer products, petrol (edging above the psychological barrier of 5zł a litre), heating, and transport (with the railways even having the cheek to put up their prices) all going up.


The political response from the left should be to create an economic policy that can protect low and medium earners from the worst effects of the economic crisis. We may expect that PO will do its utmost to avoid introducing its planned cuts until after the next election and move the public debate away from the economic arena and onto matters of secondary importance. However, as people feel the economic pain of the government's previous decisions, this will become incresingly hard to do.

3 comments:

  1. Don't you find it significant that English Old Labour politics have no popular support in Poland?

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  2. A rise on food price is a big no no. Yeah yes were there but at least we have to make sure that the expensive food that we buy is still nutritious. This is what Singaporeans do, yeah it's somehow expensive to live there but good thing that establishments like Foodlink Mandai cares for good food and healthy living.

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Go for it - but if its abusive then it gets blocked