Here the beer becomes cheaper thanks to currency advantages

In addition to the Netherlands, prices have also skyrocketed in other countries. In Germany, a liter glass of beer costs almost €15. Then it is better to drive a little further to the east. Thanks to a falling zloty, that price difference will only increase for the time being.

The great thing about my work as a currency specialist for an international company is that I get to think about currency policy for companies throughout Europe. Coincidence or not: this week I will be a guest for a few days at a large party in Munich, where the famous Oktoberfest is now being held. The size of the glasses that appear on the beer tables is not nauseating. But that also applies to the prices. For a liter of beer you can easily spend almost €15. The Oktoberfest is a unique experience just for the fun. However, for a country that scores more favorably on the BPI - or the Beer Price Index - it is better to drive a little further east.

Piwo for 12 zloty
The first beer was brewed in the Czech Republic almost two centuries ago. Today, half a liter costs an average of less than €3 in this lager country. That price will increase considerably next year. The VAT on alcohol will be increased from 2024% to 10% in 21. It could be that the cheapest beer in the region will be found in Poland next year. In many cities a 'piwo' of half a liter will cost you about 12 zloty. That is €2,60 converted. By the way, at the beginning of August you still paid €2,75 for that same glass. The difference has everything to do with a decline in the zloty.

Political choice
The main reason for this decline is the interest rate cut that the Polish Central Bank (NBP) implemented at the beginning of September. In one fell swoop, the policy interest rate was lowered from 6,75% to 6,0%. This interest rate move was quite unexpected, as inflation is still just above 10%. However, earlier this year inflation was still over 18%, so in this respect Poland is moving in the right direction. But it appears that the NBP wants to give the ruling Law and Justice (PiS) party a boost with the interest rate cut in the run-up to the parliamentary elections on October 15.

Dissatisfaction is increasing
Due to a lack of cooperation in the opposition, PiS still seems on its way to becoming the largest party. However, weakening economic growth is contributing to growing dissatisfaction among the Polish population. As usual, falling interest rates give the economy a little more breathing space. On the other hand, this decline makes it less attractive for large parties to hold assets in the currency in question. The NBP board will meet next week to make a new interest rate decision. The combination of interest rate and political uncertainty may lead to the zloty remaining under pressure, causing Poland to score increasingly better on the European Beer Price Index.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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