2022 Annual Report

Financial market

2022 Annual Report

Interest rate market

The interest rate market in 2022 was characterised by high volatility and rising yields. Polish bond yields rose for 'two-year bonds’ from 3.39% to 6.72% and for 'ten-year bonds’ from 3.67% to 6.86%. The main reason was rising inflation, to which central banks had to respond with interest rate hikes. In Poland, the Monetary Policy Council raised the reference rate by 500 b.p. from 1.75% to 6.75%. Pessimism peaked at the beginning of the fourth quarter, when yields on Polish bonds reached as high as 9%. Since then, the market situation has calmed down, not least due to the prospect of avoiding a recession in 2023, with inflation projected to fall.

Currency market

The unstable economic situation, largely resulting from the war in Ukraine, as well as significant changes in central bank policies, have triggered heightened exchange rate volatility. Although throughout the year the zloty weakened against the euro on a moderate scale, i.e. by 10 grosze to PLN 4.69, in March the price of the common currency reached PLN 5. This was happening on the back of a wave of risk aversion, which caused increased flows in global financial markets toward the safest currencies. The trend was further supported by major central banks, which increased the attractiveness of deposits in their currencies by pushing up interest rates. It is worth noting, however, that the zloty strengthened and stabilized in the last quarter of 2022, aided by some data suggesting that the economy is not facing a recession in 2023, but only a slowdown in growth.

Stock market

The year 2022 turned out to be very unfavorable for stockholders, with the WIG index falling by nearly 18%. Concerns about the economic fallout from the war in Ukraine and interest rate hikes in the face of rising inflation have triggered a surge in risk aversion, which has caused stocks to sell off and capital to flow toward safer financial instruments. The end of the year, however, brought a strong rebound in declines that significantly limited losses. Investors returned to the stock markets hoping that interest rates have already reached or are approaching maximum levels, and that the economy will avoid recession, so that the financial performance of companies will deteriorate only to a moderate degree.

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