With inflation rates rising and investors hesitant to bring their capital to Poland, the Russian invasion of Ukraine has created a vicious circle, according to Penteris Partner Tomasz Kudelski.
"The key issue in Poland today is of course the Russian invasion of Ukraine," Tomasz Kudelski says. "As Poland has a long and complex history with Russia, we are concerned about the whole situation, uncertain of the future, and apprehensive about what Russia may do in terms of other neighboring countries, including Poland." According to Kudelski, this is reflected in both Poland’s political and economic life.
"The war has somewhat dampened investor appetite," he adds. "The war close to Poland’s border is not helping convince investors to move their capital here. We have noticed faint signs on the market that VC funds may want to put their investments on hold but this is a general European tendency," he explains. Kudelski believes that "many projects are still going forward. There is no complete break – on the contrary, after a slow-down at the start of the war, the situation is slowly returning to 'business as usual,' with investors getting used to 'another' new normal."
Kudelski points out that at the moment, there are two to three million refugees in Poland from Ukraine. "I believe, that, as a society, we have done a brilliant job helping them and accommodating their needs in the most difficult of situations," he notes. "This, on the other hand, has created certain challenges for our real estate market. Accommodating an additional one million people has led to limited rental options, both when it comes to apartments and hotels, with rental prices booming."
"Another hotly discussed issue is inflation, which poses similar problems throughout the EU," Kudelski adds. "Inflation in Poland is high and, at the moment, has reached 12%." He believes there are a number of contributing factors, including the activities of the Polish government, the war, and the pandemic. "It has affected pretty much everything," Kudelski says, noting that "with the price of fuel growing, almost every sector of business and society is affected, creating a vicious circle. In the long run, it could be detrimental, as it reduces the standard of living and investors’ ability to spend their money."
Lastly, Kudelski notes, that the current Polish government is not on the best of terms with the EU. "Of course, because of the war, they have had to change their anti-EU position, but there is still the ongoing disagreement regarding the Polish Supreme Court, Constitutional Tribunal, and the judiciary in general," he explains. "The government is trying to strike a balance, but a more pro-EU approach is needed in my view," Kudelski says, adding, "in a perfect world this should only be a question of time."