The “Global Risks Report 2024” has identified two economic factors – inflation and the expected economic slowdown – as some of the key global risks for the next two years. These challenges co-exist with a number of socio-economic problems including rising living costs, pressure for pay rises and the battle for talent in the job market. Polish companies are also grappling with these challenges. Experts stress that these issues coincide with a serious long-term challenge – unfavorable demographic changes.
“This year’s ‘Global Risk Report 2024’ points out 10 main global risks. These include well-known phenomena and challenges. Firstly, inflation, which I believe, is even more severe in Poland than in many other countries. Secondly, there is the predicted economic crisis and thirdly, social polarization,” says Krzysztof Nowak from Mercer Marsh Benefits.
In the list of largest risks for the next two years, inflation ranks seventh, while the economic slowdown is at ninth place. However, social polarization raises greater concerns – it has been ranked third by global risk experts, decision-makers and business leaders. Looking at the challenges for the next decade, social polarization drops to ninth place, while uncontrolled immigration moves up to the seventh position.
Inflation has been a challenge for Poland, with a high rate maintained consistently, excluding Hungary. According to Nowak, despite recent improvements, in 2024 an inflation rate of 6% or lower may not be a given, as there still remains a sector where the government manages prices and influences their level, particularly VAT on food and energy prices.
In February 2023, inflation in Poland peaked at 18.4%, the highest since December 1996. However, many economists are skeptical of this forecast, predicting an inflation rate closer to 6% this year.
The labor market situation, increasing cost of living and pressure for wage increases are all risks closely related to inflation. The Polish Economic Institute’s forecast published in late December predicts that the rate of wage growth will remain in double digits and average 10.3% in 2024.
Another challenge for businesses in 2024 will be the implementation of the recently adopted EU Directive (EU) 2023/970 on wage transparency. This will require companies to disclose to employees information that will facilitate the comparison of existing wages and identification of potential differences.
The expert also points out that one of the main risks for the labor market and economy – especially in the long term – is demography, such as aging society and related threats to the pension system. In Poland at the end of 2020, seniors aged 60+ accounted for 25.6% of the total population, an increase of 10 percentage points from 1989. This equals 9.8 million people. This number is projected to rise to 10.8 million by the end of this decade and to 13.7 million by 2050. This means that by mid-current decade, people aged 60+ will constitute 40% of Polish society.
The detrimental demographic trends will impact the amount of future pensions and gradual impoverishment of Polish society, which will disproportionately affect women. Poland maintains different retirement ages for women and men, often resulting in lower pensions for women as they work fewer years. In addition to this, women live longer in Poland, and with their lower salaries, it exacerbates the problem of social inequalities and poverty affecting women at a higher rate.
By 2060, it is estimated that for every hundred working Poles there will be an average of 68 seniors. As a result, the so-called replacement rate, i.e. the percentage of an employee’s average wage that a new retiree receives, will drop to 24%. It was around 60% in 2016.
Also, with unemployment at around 2%, depending on the methodology, soon the ability to cover labor shortages from this pool will be limited. Although Poland has one of the lowest unemployment rates in the EU, second only to Malta, low unemployment often indicates labor market problems. This directly translates in Poland to labor shortages in many sectors, particularly IT and shared services, both key sectors driving the economy.
The 2024 “Global Risks Report”, developed by the World Economic Forum in cooperation with Zurich Insurance Group and Marsh McLennan, is based on the opinions of over 1.4 thousand global risk experts, decision-makers and several thousand business leaders. The report reveals that forecasts for the near future are deteriorating and fears for 2024 are dominated by threats associated with disinformation, extreme weather events and social polarization. Meanwhile, long-term forecasts for the world are yet again dominated by the climate and environment. The report indicates that extreme weather events, loss of biodiversity, ecosystem collapse, natural resource shortages, and environmental pollution may be amongst the top risks for humanity within the next decade.
