The impact of unfavorable macroeconomic indicators on your business

Impact on the economy (macro scale)

Year 2023: the minimum salary increased twice.

• in January 2023: from PLN 3,010 to PLN 3,490
• in July 2023: PLN 3,600

Year 2024: the minimum salary will increase twice, with record-breaking increases by over 20% compared to the previous year:

• from January 2024: PLN 4,242
• from July 2024: PLN 4,300

From the pre-pandemic 2020, when the minimum salary was PLN 2,600, until July 2024, when the minimum salary is to amount PLN 4,300, the growth rate is over 165%!

Dynamic increases in the minimum salary have a direct impact on the inflation and price increases.

Impact on the economy (micro scale)

Increases in the minimum salary have the biggest impact on industries with the majority of employees with lower competences. Apart from this, each company has costs that depend on the amount of the minimum salary. Such a major change will not be without significance for the labor market. In addition to positive effects, such as an increase in the salaries of some employees, there will be a number of negative effects, such as further flattening of salaries or a significant increase in costs of labor, which is not covered by the sales growth rate. This has an impact on the profitability of many companies, which in a negative scenario may lead to bankruptcy. As a result of declining profitability, many businesses have to increase prices, which simultaneously fuels inflation.

Impact on the economy (macro scale)

Year 2023: The average monthly salary in the corporate sector reached PLN 8,032.96, an increase by 9.6% compared to the previous year.

Year 2024: Experts expect that an upward trend of close to 10% will be continued.

Impact on the economy (micro scale)

In service industries, salaries often account for the largest portion of costs.

Unless offset by an adjustment of sales prices, the continuous pressure on salary growth may lead to a drop in profitability.

In order to effectively respond to changing market trends, the profitability of a business should be monitored on a regular basis. Monitoring should be performed not only at the level of the entire organization but also at the level of individual departments, groups of services or products.

Impact on the economy (macro scale)

The conflict in Ukraine caused supply chain disruptions, which also translated into a dynamic increase in prices in energy markets. This translated directly into an increase in costs of raw materials and supplies. The price growth had a particularly strong impact on the construction, transport and production sectors.

Impact on the economy (micro scale)

Anticipating the growth in raw material prices, some businesses have opted for early stocking, which allowed them to secure access to goods, materials and raw materials. Price volatility and unpredictability caused by the disrupted supply chain, have created risks that affect business profitability.

This year, many companies will have to face new, higher prices in the market. As with rising salaries, failure to properly adjust sales strategy may have an adverse effect on profitability.

It should be remembered that excessive stocking to ensure access to raw materials and supplies at lower prices has consequences in terms of deteriorated liquidity and turnover ratios.

Where adverse macroeconomic trends affected customers of a business and caused problems with their liquidity, that may have an adverse effect on the receivables turnover ratios of the latter. Consequently, this may also affect the liquidity of the business.

Impact on the economy (macro scale)

The reference rate of the NBP has remained unchanged since October 2023. It amounts to 5.75% p.a., which is by 1 p.p. lower than at the end of 2022.

The year 2022 was a record-breaking year in terms of interest rates, which resulted in a drastic increase in costs of funding and had an adverse effect on the standing of many businesses. However, upcoming stabilization is forecasted as well as following decline in interest rates.

Impact on the economy (micro scale)

The decline in interest rates is the decline in costs of funding, and thus a relief to the budgets of businesses, in which interest has so far been an important element.

Funding structure analysis. The present moment is good to review the funding structure of a business, assess liquidity ratios and examine the possibility of building a more efficient funding structure and thus optimize costs of debt service.

Investment potential. A decrease in costs of funding opens up greater investment opportunities. If investment decisions have so far been postponed due to high costs, it is time to reconsider and reevaluate investment plans.

Impact on the economy (macro scale)

In 2023, the Polish zloty strengthened against major currencies such as the US dollar and the euro. Compared to 2022, we paid on the average by 6% less for the US dollar and 3% less for the euro.

Exchange rate trend analysis. The change in the exchange rate trend was particularly noticeable at the end of the year. On the last day of 2023, compared to the last day of 2022, the US dollar rate fell by as much as 11%. The corresponding reduction for the euro was 7%.

Impact on the economy (micro scale)

Large fluctuations in foreign exchange rates have a direct effect on the financial position of the businesses that make significant transactions and settlements in foreign currencies.

These changes are detrimental to companies with significant foreign currency revenues, while businesses with a high share of foreign currency costs can benefit from them.

Therefore, it is worth looking closely at profitability and liquidity ratios to assess how the strengthening of the Polish zloty has affected the financial results of companies; it is also worth considering to hedge currency volatility.

Impact on the economy (macro scale)

Polish GDP slowed down significantly in 2023, and reached only 0.2% compared to 5.3% in 2022.
Excluding the period of the pandemic, this is the worst result for decades and the lowest since Poland joined the European Union.

High interest rates and inflation are identified as the main reasons for this, resulting in lower private consumption and lower foreign demand.

Such an economic slowdown has a significant effect on the circulation of money in the economy, which could deepen the recession. This may also add to further contraction in demand and consumption.

Impact on the economy (micro scale)

In many businesses, the economic slowdown may lead to a drop in sales. In addition, liquidity problems, coupled with increased costs of funding and more stringent requirements for obtaining funding (such as loans and borrowings), may threaten corporate stability of companies or even result in their bankruptcy.