Transcript International Insolvency Law Organisational matters

Dr Marek Porzycki
Chair for Economic Policy
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Following a 6-year period of high economic
growth (averaging 5% of GDP), inflation has
risen above 4% and is predicted to remain
high. Growth of asset prices (real estate,
shares in companies) was consistently above
inflation. During last 2 years real estate prices
grew in average by 25%.
You are a member of the body deciding on
the monetary policy (e.g. Monetary Policy
Council). What steps would you advise to your
colleagues?
A sudden spike in global oil prices caused
inflation to rise to 4% in the last quarter (Q1).
Further rise to 5% is expected in the next two
quarters (Q2 and Q3).
The economy remained stagnant with
growth rate (annualised) at 0,7% of GDP in Q1,
predicted to fall to 0,1-0,3% in Q2 and Q3.
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Economic growth slowed down from 3% of
GDP to 1,8% and is expected to fall further
because of weak results in neighbouring
economies depressing export profits.
Inflation rate of 4,5% is still above the target
of 2,5% but it is expected to fall.
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A credit boom ended with a sudden fall in
real estate prices. Risk on loans granted by
banks increased significantly, as they were
not anymore covered by the value of real
estate used as collateral. Resulting doubts
over long-term solvency of banks caused
interbank lending to freeze.
Inflation level was 4% and growing before the
fall of real estate prices. Since the credit
crunch inflation rapidly fell to below 2%.