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From deflation to inflation - what could protect Poles from losses?

From deflation to inflation - what could protect Poles from losses?

created Daniel Kostecki7 February 2023

The rate of price growth in Poland is alarming. According to estimates Polish Economic Institute, despite the recent decline in inflation, it is to return to the peaks and break them. Ultimately, inflation in Poland in this quarter may exceed 20 percent. compared to the previous year, according to the PIE report of December 19, 2022. At this point, it is worth recalling that less than a decade ago, the Polish economy was struggling with ... deflation. In March 2015, inflation was -1,6 percent. At that time, deflation in Poland was the largest outside of Cyprus and Greece when it comes to EU countries. It was a phenomenon that we had never seen before in the current history of Poland - it is a big change for such a short period of time.

To be more precise, inflation over the years, i.e. from deflation to galloping inflation, totaled around 40% in Poland. So, over the last 8 years, have Poles been able to find shelter for their savings? What was the situation on the capital market, Polish stock exchange, bonds, gold and real estate markets at that time? After all, 40 percent. inflation in 8 years, it is "only" 5% on average. inflation per year. Was it difficult to find assets that give such a rate of return?

Polish Stock Exchange

It would seem that an increase in prices in the economy may mean an increase in share prices due to the fact that companies increase revenues because they simply sell their products more expensive. However, not in the case of WIG20 companies. Even considering here WIG20 Total Return index, i.e. the one in which they are included dividends (we buy stocks, get a dividend and use it to buy stocks again) failed to overcome inflation. What's more, this index in 8 years is practically "zero". This means that in real terms an investment in such an index would result in a loss in this period due to inflation.

Smaller companies fared much better between 2015 and the beginning of 2023. mWIG40TR at that time boasts 55 percent. rate of return that beats inflation. sWIG80TR, in turn, achieved a rate of return over 100% during this time, which puts it at the forefront of the popular WSE indices beating inflation in the last 8 years.


Bonds quoted on the financial market unfortunately did not beat inflation at that time. Based on the popular index of Polish bonds TBSP calculated by GPW Benchmark, we will see that the rate of return is barely over 12%. Here, it was best to hold inflation-indexed Treasury bonds (e.g. 4-year or 10-year Treasury bonds) rather than bonds purchased on the market.


By buying dollars in 2015 until the first week of February 2023, we could gain about 25 percent on the exchange rate, but it is not enough to beat the inflation that appeared in Poland at that time. Only by selling dollars at PLN 5 would there be a chance to level out inflation. Meanwhile, the euro became more expensive by about 9 percent, and the Swiss franc would have to be shot just before the change in the policy of defending the minimum exchange rate of the euro to the Swiss franc, to buy it for about PLN 3,6 before it was for PLN 5 in a moment. The exchange rate data comes from the decentralized currency market.


Gold seems to be one of the biggest wins in recent years. At the beginning of 2015, an ounce of gold in Poland cost about PLN 4200 (conversion rate for gold listed on the US stock exchange at the USD/PLN exchange rate). In the first week of February 2023, an ounce of gold costs over PLN 8200, which means 95 percent. growth. Thus, gold definitely beat inflation in Poland and also seemed to be quite a popular asset among Poles.

Real Estate

Looking at the real estate market in Poland and the price index published by Eurostat, we can see that this market has also outperformed inflation. On average, real estate prices in Poland increased by 67 percent. in the period from the beginning of 2015 to the last quarter of 2022. This was also helped by the pandemic boom for apartments and houses, however, the trend was visible earlier, resulting from, among others,  from the increase in the average wage in our economy.

To sum up, from 2015 to the beginning of 2023 we went from deflation to galloping inflation, and smaller companies, gold or real estate and Treasury bonds indexed with inflation could protect against the loss of capital value. Of course, remember that past returns do not guarantee future returns.

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About the Author
Daniel Kostecki
Chief Analyst of CMC Markets Polska. Privately on the capital market since 2007, and on the Forex market since 2010.