Macroeconomic situation

The years 2021 and 2022 were a period of strong economic expansion following the pandemic, as well as challenges posed to the European Union countries by the armed conflict in neighbouring Ukraine and the related inflation. In 2023, EU countries came up against the natural consequences of the events of previous periods. The fiscal support used was partially withdrawn, and the monetary policy introduced in response to high inflation limited the economies’ growth potential. The reasons for the dynamics loss are also perceived in the weakness of consumption caused by a decline in real purchasing power and consumer sentiment, as well as a drop in exports.

According to data published by the European Commission (EC), GDP growth in 2023 in the entire EU amounted to 0.4% y/y¹.

1. Source, https://ec.europa.eu/eurostat/en/web/products-euro-indicators/w/2-08032024-ap

Source: GUS, Hungarian Central Statistical Office, State Statistics Service of Ukraine* (the data on GDP in Q4 of 2023 were not available as at the date of publication of the Report).

According to preliminary estimates, the gross domestic product in 2023 recorded a real growth of 0.2%, compared to an increase of 5.3% in 2022. The preliminary estimate of GDP for Q4 of 2023 indicates 1.0% dynamics compared to 2.5% in the same period of the previous year².

Industrial production sold in 2023 decreased by 1.5% compared to an increase of 10.2% recorded in 2022. In each subsequent quarter, lower and lower dynamics was noticeable³. Total retail sales declined by 4.1% y/y in 2023. However, construction and assembly production improved – by 4% year on year.

The labour market still records low unemployment rates, which at the end of December 2023 amounted to 5.1%, which denotes a decrease by 0.1% y/y. Concurrently, the average salary in the enterprise sector in Poland in 2023 amounted to PLN 7,444.39, which stands for a nominal increase of 11.9% compared to the previous year.
In real terms (taking into account inflation), wages increased by only 0.4% throughout 2023, compared to a 4.3% decline throughout 2022.

As for the housing construction, the first fall in many years was observed. According to CSO’s data in 2023, 220.4 thousand apartments were commissioned (a decrease by 7.6% y/y). The sector, which recorded high growth dynamics in recent years, 2022 and 2023 started to slow down significantly in the face of higher borrowing costs and difficult access to home loans. This is reflected in the number of building permits issued or notifications with a construction project (in 2023 – 241.1 thousand, which means -19.1% y/y) and notifications of commenced construction sites (in 2023 – 189.1 thousand, which means -5.6% y/y).

Throughout 2023, CPI inflation reached 11.4% y/y, and in Q4 alone it amounted to 6.4% y/y. The central NBP forecast indicates that in 2024 the inflation will reach 4.6% on an annual basis. Price dynamics is expected to approach the inflation target (2.5% +/- 1%) in Q4 of 2025.⁴

The European Commission estimates the national GDP in 2024 at the level of 2.7% and inflation 6.2%⁵. The International Monetary Fund anticipates a slightly lower GDP dynamics of 2.3% in ⁶.

2. Source: Central Statistical Office, Gross domestic product in 2023 – preliminary estimate, January 2024, Flash estimate of gross domestic product for Q4 of 2023, February 2024.
3. Data source for Poland: Central Statistical Office, Socio-economic situation of the country in 2023, February 2024 – unless otherwise indicated.
4. Source: National Bank of Poland, Inflation and GDP projection – November 2023, January 2024.
5. Source: European Commission, Economic forecast for Poland, January 2024.
6. Source: International Monetary Fund, World Economic outlook update, January 2024

The Gross Domestic Product in Hungary in 2023 reached -0.9%. In Q4 of 2023, GDP dynamics was, according to a quick estimate, 0.0%, while in the previous quarters it reached: -0.4%, -2.4% and -0.9%, respectively⁷.

In 2023, the average gross salary in Hungary amounted to HUF 571,200 (approx. PLN 6,800), which means an increase of 14.2% compared to the same period of the previous year. The unemployment rate in December reached 4.2%, which means an increase by 0.4% y/y.

Consumer prices in Hungary rose on average in 2023 by 17.6% compared to the previous year, and their increase in December was 5.5%.

In 2023 the volume of industrial production increased by 5.5% y/y, and in December alone it fell by 13.7% compared to December 2022⁸. The volume of construction production in 2023 went down compared to the previous year’s level by 5.0%, and in December alone it decreased by 4.3% compared to December 2022.
In 2023, 9.8% less apartments were commissioned than in the corresponding period of 2022, and the number of building permits for new apartments in the country declined by 38.6%.

According to the European Commission, economic growth in Hungary may be at the level of 2.4% in 2024, while inflation may amount to approx. 5.2%⁹. The International Monetary Fund forecasts that Hungary’s GDP is to reach 3.1% in 2024¹⁰.

7. Data source for Hungary: Hungarian Central Statistical Office (KSH) – unless otherwise indicated.
8. Referring to data adjusted for the number of working days in December 2023, the dynamics is -8.7% y/y.
9. Source: European Commission, Economic forecast for Hungary, January 2024.
10. Source: International Monetary Fund https://www.imf.org/en/Countries/HUN#countrydata.

In 2023, Ukraine’s economy slowly recovered from the initial shock related to the pending war, which contributed to extensive damage to the national economy.

By the end of 2022 the vast majority of companies reduced production due to electricity shortages. In 2023, the situation in the energy sector improved.

Despite troublesome war conditions, the Ukrainian economy showed great resilience, and Ukraine’s GDP increased by 5% in 2023 ¹¹. The increase was possible due to the greater adaptability of business and people to war conditions than in the initial phase of the conflict, increased harvests of agricultural produce, faster development of alternative supply routes, and also thanks to financial support from international partners. Owing to increased foreign financial support, international reserves went up by 42% y/y to USD 40.5 billion at the end of the year¹².

In 2023, inflation slowed down significantly to 5.1%¹³. The inflation reduction in 2023 is the aftermath of a number of actions taken by the National Bank of Ukraine (NBU) to maintain the stability of the currency market: limiting the price growth of a wide range of goods with an import component, freezing the prices of certain residential and commercial services, and good harvests and appropriate growth availability of food products.¹⁴

In 2023, the NBU interest rate changed four times. The NBU used the interest rate as one of the methods of reducing inflation. From January to July 27, 2023, the interest rate remained at 25%. Then, it was reduced to 22% in July, to 20% in September, to 16% in October and finally to 15% in December. In the future, the NBU is ready to flexibly adjust its interest rate policy, taking into account changes in the balance of risks for exchange rate stability and inflation¹⁵.

The situation on the currency market remained under control. The NBU continued to balance the currency market, compensating for the structural deficit of foreign currency, but allowing the exchange rate to move both towards strengthening and weakening, depending on changes in the demand-supply balance.

In October 2023, the NBU decided to switch to a system of managed exchange rate flexibility, which influenced the change in the value of the dollar against the Ukrainian currency at the end of the year.
The official exchange rate of the hryvnia to the US dollar remained stable at 36.5686 UAH/USD until October 3 2023¹⁶. The regulator supported the hryvnia, but allowed the exchange rate to react to market trends. On December 1, the NBU eliminated all restrictions on the possibility of selling currency in cash for individuals¹⁷.

Since the beginning of the full-scale war, i.e. February 24, 2022 to the date of publication of the report, data from the Ukrainian statistical office on average wages and the unemployment rate have not been published. The labour market in Ukraine is still struggling, but some recovery was noticed in 2023. The number of vacancies remains far from what it was like before the war, but the number of job offers is on the increase every month¹⁸.

Concurrently, the Ukrainian market is facing a shortage of workers. It results from emigration and internal migration initiated upon the outbreak of the war. The labour market is also influenced by military mobilization and the fact that many people are killed in action. The greatest scarcity of workers is observed in the medical and commercial sectors¹⁹.

2023 was a year of revival in the real estate and construction market in central and western Ukraine.
In the capital, most developers announced the continuation of work on residential complexes.
In the west of the country, where many new projects were launched, the situation was even better. Since the beginning of the year, the cost of a square meter in new construction has increased by around one third²⁰.

Many construction companies suffered from material supplies, increased construction costs, and labour instability due to military mobilization. In addition, significant infrastructure damage in some regions forced urgent reconstruction, which may stimulate demand for construction services in the long run.
Construction materials suppliers who previously imported products from Russia and Belarus were also forced to switch to products from the EU and Turkey.

The closure of Ukrainian ports prevented the import of construction materials by sea. By the end of 2023, the import of raw materials and materials was hindered by Polish and Slovak carriers blocking the border with Ukraine. This contributed to a boost in prices and longer lead times of imported construction materials. Following theborder blockade, logistics costs doubled, leading to a 5-10% increase in prices of imported construction materials²¹.

The World Bank forecasts that Ukrainian GDP is to go up by 3.2% in 2024²².

11. Source: Portal: Interfax-Ukraina, January 2024 https://interfax.com.ua/news/economic/959975.html
12. Source: National Bank of Ukraine, January 2024, https://bank.gov.ua/ua/news/all/mijnarodni-rezervi-ukrayini-zrosli-uprodovj-2023-roku-na-42-ta-perevischili-405-mlrd-dol-ssha
13. Source: Minfin.com.ua portal, January 2024 https://index.minfin.com.ua/ua/economy/index/inflation/2023/
14. Source: National Bank of Ukraine, January 2024 https://bank.gov.ua/ua/news/all/komentar-natsionalnogo-banku-schodo-rivnya-inflyatsiyi-u-2023-rotsi
15. Source: National Bank of Ukraine, January 2024 https://bank.gov.ua/ua/monetary/archive-rish
16. Source: National Bank of Ukraine, https://bank.gov.ua/ua/news/all/nbu-vprovadjuye-kerovanu-gnuchkist-obminnogo-kursu-scho-posilit-stiykist-valyutnogo-rinku-ta-ekonomiki?fbclid=IwAR0xqm5eVbkLx4j3aa4TpkNOslmyKmGx-QVOYMO8vFeXoLPCrFkRS8fs5lA
17. Source: National Bank of Ukraine, November https://bank.gov.ua/ua/news/all/natsionalniy-bank-i-nadali-pomyakshuye-valyutni-obmejennya-dlya-biznesu-ta-gromadyan
18. Source: Pravda Ekonomiczna Portal, January 2024 https://www.epravda.com.ua/publications/2024/01/9/708528/
19. Source: National Bank of Ukraine, January 2024, https://bank.gov.ua/admin_uploads/article/MMR_2024-01.pdf?v=6
20. Source: Portal Biznes NV, December 2024, https://biz.nv.ua/ukr/markets/2023-rik-vidnovlennya-na-rinku-neruhomosti-ukrajini-50380482.html
21. Source: Gmk center portal, December 2024 https://gmk.center/ua/opinion/budivelnij-rinok-u-2023-roci-mozhe-zrosti-na-25/
22. Source: World Bank, Global Economic Prospects, https://www.worldbank.org/en/publication/global-economic-prospects.

Changes in the exchange rates of the Group’s key currencies

In 2023, the Polish zloty strengthened against major currencies, including the euro.

Data of the National Bank of Poland indicate that the average euro exchange rate in 2023 dropped to PLN 4.54 from PLN 4.69 in the previous year. In the analysed period, the EUR/PLN exchange rate was volatile, oscillating between PLN 4.31 and PLN 4.79. The appreciation of the Polish zloty against the euro calculated on the basis of the exchange rate from the end dates of the analysed period amounted to 7.3% (with the exchange rate at the end of 2023 at PLN 4.35), with a relatively low volatility coefficient of quotations (2.8%), calculated on the basis of the deviation standard and arithmetic mean.

The valuation of PLN during the reporting period was determined by both external factors - including: the war in Ukraine, the global increase in inflationary pressure, the interest rate policy of the leading central banks - and internal factors, including further decisions of the Monetary Policy Council on interest rates or negotiations with the European Union regarding the launch of the National Reconstruction Programme.

In 2023, the exchange rate of 100 Hungarian forints against the Polish zloty decreased on average to PLN 1.19 from PLN 1.20 in the previous year. During this period, the 100 HUF/PLN exchange rate was volatile, oscillating from approximately PLN 1.13 to PLN 1.26. The appreciation of PLN against HUF calculated on the basis of the exchange rate from the end dates of the analysed period amounted to 3.1% (with the exchange rate at the end of 2023 at PLN 1.14), with a relatively high volatility coefficient of quotations (2.8%).

In 2022, due to the extraordinary situation on the Ukrainian market, the Group introduced a change in the rules regarding the translation of financial statements of Śnieżka-Ukraina, for which the Ukrainian hryvnia (UAH) is the functional currency. The mentioned change was also applicable in 2023.

The policy that the Group applies when converting items expressed in foreign currencies is described in item 2.4.6. Translation of items expressed in foreign currencies of the Consolidated Financial Statements for 2023.

In the context of the above changes, the Group adopted the closing rate as at December 31, 2023, set by the National Bank of Poland at which the Group exchanges UAH for PLN, i.e. 1 UAH = PLN 0.1037.

Contact regarding the report

Regulatory environment