Latest Big Mac Index. The zloty is overrated

Two pieces of beef, pickled cucumber, sesame roll, sauce, and finely chopped lettuce. The Big Mac hamburger is the same in all countries where Mac Donald's restaurants operate. In theory, prices for this uncomplicated product should be similar in all countries.

It turned out that they were different, and the British weekly magazine The Economist identified an incorrect exchange rate as one of the reasons for this difference. Twice a year, in January and July, the Big Mac Index is calculated to show differences in the valuation of individual world currencies.

See also: The zloty exchange rate has gone crazy. We know what the reason is

In Poland, the price of a Big Mac (not included) in most Mac Donald's restaurants is currently PLN 19.90. According to the Polish National Bank's latest average dollar exchange rate, which is PLN 4.04, it is 12.7% cheaper. Compared to the USA, where the same product costs $5.69. For comparison, in July 2023, the difference was 10.7 percent, and in January of last year it reached 23.6 percent.

Read also at Business Insider

However, we cannot forget about other issues in pricing. Aside from the exchange rate, there is also a fundamental issue: supply and demand. Maybe at 13 percent. If this rises, there will be much fewer customers in Poland, and popular chain restaurants will be treated as more expensive. Residents' purchasing power is also taken into account, and the costs of producing hamburger ingredients vary from country to country. This is what The Economist thought too.

In addition to the “raw” Big Mac Index, which only compares the price of the sandwich expressed in dollars, it is also calculated Comparison with the purchasing power of the population of each individual country, specifically with the gross domestic product per capita. And here the conclusions are completely different.

Once the conversion according to per capita GDP is taken into account, the zloty turns out to be not only undervalued, but even undervalued Overvalued against the dollar by 3.9%. Last July it was overvalued by 5.5%, and a year ago in January – it was undervalued by 9.6%. If someone, following the Big Mac index, bought the zloty against the dollar a year ago, he would be richer now.

“A Big Mac costs 12.7% less in Poland ($4.97) than in the United States ($5.69) at market exchange rates. Taking into account differences in GDP per person, a Big Mac should cost 16% less.” This indicates that The zloty is overvalued by 3.9%.” – we read in “The Economist”.

See also: Strong fluctuations in the zloty. New predictions for 2024

Based on the Big Mac Index, the British weekly magazine considers the most overvalued currencies to be: Uruguayan peso (overvalued by 50.8%) and Swiss franc (overvalued by 45.6%). The most undervalued are the Malaysian ringgit (undervalued by 41.8%) and the South African rand (undervalued by 41%).

According to this study The Euro is overvalued by 15.3%.and the British pound by 10.3%. The Polish zloty is valued similarly to the US dollar as the Canadian dollar, and much better than the Czech koruna, which is undervalued by 7%. And Hungarian Forint – Undervalued by 18.1%.

Echo Richards

Echo Richards embodies a personality that is a delightful contradiction: a humble musicaholic who never brags about her expansive knowledge of both classic and contemporary tunes. Infuriatingly modest, one would never know from a mere conversation how deeply entrenched she is in the world of music. This passion seamlessly translates into her problem-solving skills, with Echo often drawing inspiration from melodies and rhythms. A voracious reader, she dives deep into literature, using stories to influence her own hardcore writing. Her spirited advocacy for alcohol isn’t about mere indulgence, but about celebrating life’s poignant moments.

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