Through the prism of various events and changes in the global financial markets, the year 2023 was exceptional and full of surprises. It was a time of dynamic changes in the Polish economy, starting from the highest inflation in 26 years in February, through a shocking cut in interest rates in September, to the strong appreciation of the złoty at the end of the year. Additionally, power change and record-breaking trends on world stock exchanges also introduced a lot of chaos. It’s hard to overlook the deflation, globally high cost of money, and conflicts that influenced the prices of gold and oil. How do analysts rate this year?
Inflation – the word of the year?
In 2023, inflation might have been the most commonly used word. Struggling with this issue was the biggest challenge of the passing months, which required central banks to take action.
“Without a doubt, the past year has passed under the sign of fight against inflation. It’s worth appreciating what has been achieved in this area, but not to forget that the fight is not over. However, I believe that deflation will not be the word of 2023, but pivot, which stirred the most emotions in the markets. The change of approach by central bankers was occupying the minds of investors for most of the last months, but it was confirmed by the FED only in December (we are still waiting for ECB)” – says Krzysztof Adamczak, a currency analyst at Walutomat.pl.
This year was intense according to another analyst. First, in February, Poland had the highest price dynamics in 26 years, followed by a stunning deflation process (6.6% year on year in November). The shocking reduction of interest rates by the Polish Central Bank in September was a crushing blow to the zloty. A blow after which, according to Adam Fuchs, the national currency rose like a phoenix from the ashes to make one of the strongest appreciations in its history by the end of the year (US dollar rate below PLN 4, and the euro rate at PLN 4.30).
“The parliamentary elections and the change of power opened a new chapter in domestic politics. Globally, it was no less exciting, stock indexes (including the most important ones) were breaking historical records, which in the past didn’t necessarily happen during times of equally record interest rates” – adds Adam Fuchs, Senior FX Dealer at InternetowyKantor.pl.
Notable Wind of Change on the Markets
In the second half of the year, both locally and globally, markets saw plenty of action. The main impulses were political factors. In Poland, it was about the change in power, which opens better prospects, for example cooperation with the European Union.
“This added wind to the sails of our currency, and the exchange rates to the main currencies such as the EUR or USD were at levels not seen for a long time, respectively at 4.30 and 3.91” -comments Krzysztof Pawlak, a currency analyst at the Walutomat.pl service.
On the one hand, the interest rate cuts were associated with the elections, and on the other hand, the markets were very enthusiastic about the change of government. According to a currency expert, Maciej Przygórzewski, the euro rate has dropped by an impressive 7.5% since the beginning of the year, and the dollar rate by 9.25%. That’s respectively 35 and 41 cents. The stock exchange also made gains this year, especially during the post-election euphoria.
Taking a wider view, the transition of central bankers to a “wait&see” approach after a period of sometimes desperate moves on interest rates is noteworthy.
Shadows of 2023
Unfortunately, the number of conflicts in the world is not decreasing, which noticeably affects the markets. At the beginning of the year, it seemed that it would be the year of the end of Russian aggression in Ukraine. However, the reality turned out to be much more brutal, and the prospects for its end are very distant.
How was the passing year
In conclusion, 2023 was full of contrasts and surprises in the financial markets. Decisions of central banks, political changes, and geopolitical events shaped the investment landscape. Investors had to be flexible and quickly react to changing conditions, while analysts strove to understand and predict what the next day would bring in the dynamic backdrop of the world economy. Can we expect calm and stability in the markets in 2024? It’s hard to predict, as reality has been astonishing us for several years now.
