What are the main sources of the significant decline in economic growth and recession of the economy in 2023?

In Poland, during the SARS-CoV-2 (Covid-19) coronavirus pandemic, the government introduced a large amount of additional printed money into the economy from April 2020, which was introduced off-budget in a procedure specially created for this purpose. The central bank also participated in the procedure, buying additional new series of Treasury bonds issued by the Treasury directly. The printed money was introduced into the economy through special purpose funds created mainly in government-controlled institutions, such as the Polish Development Fund and Bank Gospodarstwa Krajowego, among others. A large amount of the printed money thus went to government-controlled state-owned companies, including, among others, the monopolistically operating large companies in the energy, fuel and mining sectors, which contribute to the leading part of the national energy industry, which produces energy mainly on the basis of dirty combustion energy, i.e. on the basis of burning fossil fuels. In Poland, still thanks to government subsidies, more than 3/4 of energy is generated from burning fossil fuels. If the subsidies provided from governments to the combustion power sector since the 1990s had fueled the development of renewable and emission-free energy, Poland would now be a modern and energy-secure country, where most of the energy would now be produced by clean renewable energy. With the aforementioned subsidies, several large nuclear power plants, many wind farms and thousands of solar installations could have been built. Unfortunately, the government preferred to be in comity with the unions operating in coal mines, lignite mines, power and fuel companies in order to support the development of combustion energy and inhibit and block the development of renewable and carbon-free energy. Thanks to the topic that hard coal is sourced from deep-sea high methane mines in the country, the government has been subsidizing coal mining for many years with many billions of zlotys. Surcharging was a permanent part of this pseudo-business, since mining had already been permanently loss-making, unprofitable for many years. In addition, thanks to the government's comity with the aforementioned trade unions, the level of wages in the loss-making fossil fuel extraction sector was high and growing despite the declining business efficiency of these companies. Since the SARS-CoV-2 (Covid-19) coronavirus pandemic, more than 300 billion in added PLN has been injected extra-budgetarily into the economy. According to some estimates compiled by scientific institutes independent of the government, this is even an amount of about 400 billion PLN. The printed money was introduced into the economy on the basis of specially introduced for this purpose regulations, covid laws, on the basis of which, on the one hand, lockdowns were introduced, temporarily excluding from real economic activity many companies, mainly service sectors. On the other hand, on the basis of covid laws introduced specifically for this purpose, printed money was transferred to the majority of companies and enterprises operating in the economy as subsidies to pay fixed costs and surcharges on salaries of employed workers on the condition that employment was maintained. Non-repayable said financial subsidies were also given to many companies and enterprises, including state-owned companies, whose business activities were not subject to lockdowns. Since in recent years the annual budget of the state is about 500 billion PLN so the estimated scale of the SARS-CoV-2 (Covid-19) coronavirus printed since the pandemic almost matches the mentioned amount. This was possible because the introduction of covid-based regulations into the economy of printed money continued until the parliamentary elections held on 15.10.2023 despite the fact that the pandemic ended much earlier. The magnitude of the negative impact on the community and on the economy quickly began to decline as early as January 2021, when a mass vaccination program was introduced on the basis of millions of coronavirus vaccines purchased by the government from several pharmaceutical companies. However, the practice of injecting printed money into the economy on the basis of covid regulations continued. The result was an increase in inflation as early as Q2. 2021. Inflation in Poland grew so fast that it was one of the highest in Europe from 2021 to 2023. With the aim of fighting inflation from October 2021, the central bank, i.e. the National Bank of Poland, rapturously began to raise interest rates. Raptly because surprising most financial analysts and economists with this action, since only two months earlier the president of the National Bank of Poland had assured during press conferences that these increases would begin in a year at the earliest. As a result, many citizens at the time took out extremely cheap long-term mortgages and business loans. Since, contrary to the banking standards of Western countries in Poland, for many years more than 90 percent of long-term loans were granted by commercial banks at variable interest rates, shifting the risk of interest rate changes to borrowers, so when the central bank raised interest rates, commercial banks quickly raised the oproc. of loans, including those previously granted, and slowly raised the oproc. of deposits and other bank investment products. Thus, the central bank's raising of interest rates had a very weak anti-inflationary effect and a fast and strong deconflationary effect. This was due to the rapidly declining creditworthiness of borrowers and falling investment levels in many sectors of the economy. For example, in the construction sector in Q3 2022, the level of investment fell by more than two-thirds on an annual basis. Because Poland's central bank raised the key benchmark interest rate from an interventionist, pandemic, anti-crisis level of 0.1 percent to 6.75 percent during the one-year period from the beginning of October 2021 to September 2022, so borrowing during the period of record, interventionist-low interest rates rapidly became more expensive. The period of the aforementioned interventionist, record-low interest rates lasted as long as a year and a half, and, according to assurances from the central bank governor, was expected to last much longer. As a result, the scale of mortgages and economic loans taken out at the time grew rapidly. When the central bank raised interest rates to a significant degree, the installments on repaid loans also increased significantly. For loans taken out at interventionist low interest rates, loan installments in the fall of 2022 were already more than double what they were at the beginning of the loan repayment. In addition, in 2022, producer inflation in some months was even more than 10 percent higher than consumer inflation. This was due to rapidly rising prices of energy and industrial raw materials, prefabricated products, semi-finished goods, wages and other production factors. Enterprises and companies, by passing on the increase in the prices of production factors to the prices of the products they sold, generated record high profits on the one hand and added to the rapidly rising inflation on the other. Commercial banks also generated record profits from mid-2021 onward as the central bank rapidly raised lending opc. rates and much slower deposit rates as interest rates rose. Despite the fact that the central bank had already stopped raising interest rates at 6.75 percent (the basic reference rate) in September 2022, the rate of economic growth was declining rapidly, the downturn was worsening and, interestingly, despite the Central Statistical Office showing no significant increase in unemployment. This happened because entrepreneurs converted full-time employment to part-time employment for many of their employees, and/or forced some of their employed staff to switch to self-employment in the setting up of sole proprietorships, i.e., establishing a sort of mini-company with which they continued to work. In this way, most of the large banks and companies have significantly improved their economic and financial situation since the pandemic, while most citizens have become poorer. For most citizens, the level of real wages, the level of savings since the pandemic has dropped significantly. Even the increase in wages in the corporate sector since Q2 2022 no longer compensated for the decline in the purchasing value of money as a result of high inflation. In addition, despite the fact that the central bank in Poland stopped relatively early, more than a year earlier than the Federal Reserve Bank and the European Central Bank to continue raising interest rates at the aforementioned level of 6.75 percent, Poland's economy went into recession in the 1st half of 2023. According to recently published data by the Central Statistical Office, Poland's recession reached 0.6 percent in April 2023. It is interesting to note that the Polish economy in 2023 experienced one of the highest downturns compared to other European Union countries, and this despite the government's continued social programs, electricity price subsidies, reduced VAT on food since the pandemic, and previously also on motor fuels (until December 2022). Despite soft fiscal policy and the government subsidy programs being developed, financed from the state's public finance system, Poland has experienced a recession. The government's energy price subsidies are due to the fact that the government was planning its re-election in the parliamentary elections, which took place in October 2023. This was one of many financial shielding instruments for citizens, which was intended to provide short-term, ad hoc some relief for citizens from rising household maintenance bills before the parliamentary elections. On the other hand, if the government's energy price subsidy system had not been in place then market energy prices would have been the highest in Poland. They would have been the highest due to the fact that Poland's energy production is extremely expensive, and mainly based on dirty combustion energy. This is a result of the government's restriction and blocking of the development of renewable and emission-free energy sources. The procedure of limiting the development of renewable energy sources and subsidizing dirty combustion energy from the system of state finances since the 1990s. While the procedure of blocking the development of renewable and emission-free energy sources, including onshore wind power since 2016 and solar power since April 2022. The result is a low level of energy security of the energy sector in Poland and some of the highest costs of energy production, not only against the background of the European Union, but also on a global scale. The lack of undertaken, necessary investments in new energy technologies, the limited scale of investments in the development of clean, renewable and emission-free energy, on the basis of which energy could now be produced in the cheapest way, is one of the key determinants limiting economic development, including the prospective development of the Polish economy. In view of the above, in recent years Poland has had an exceptionally chaotic, short-sighted pseudo-economic policy, which led, among other things, to the fact that Poland experienced a recession in Q2 2023. In April 2023, the CSO showed a 0.6 percent recession. In addition, the pseudo-economic policies pursued in recent years have resulted in a large increase in the debt of the state's public finance system. Citizens have finally noticed how irrationally the aforementioned pseudo-economic policies have been carried out in recent years, and voted overwhelmingly against the incumbent government in the parliamentary elections held on 15/10/2023. Perhaps the new government will repair all that has been destroyed in the Polish economy in recent years. Perhaps the new government will restore rationality, pro-social, pro-climate, pro-environmental, etc. in terms of its economic policies.

In view of the above, I address the following question to the esteemed community of scientists and researchers:

What are the main sources of the significant decline in economic growth and recession of the economy in 2023?

What are the main sources of the recession of the economy in 2023?

And what is your opinion about it?

What is your opinion on this issue?

Please answer,

I invite everyone to join the discussion,

Thank you very much,

Best regards,

Dariusz Prokopowicz

The above text is entirely my own work written by me on the basis of my research.

In writing this text I did not use other sources or automatic text generation systems.

Copyright by Dariusz Prokopowicz