Poland's new government faces economic challenges: budget deficit in 2024 could reach highest level since Covid pandemic
Kyiv • UNN
Poland's budget deficit could rise significantly next year, as spending commitments and revenue forecasts influence the outlook. The budget law is currently one of the most pressing issues to be resolved by the new government
Minister of Finance Andrzej Domanski said that the budget deficit for 2024 will be different from the September draft, where it was estimated at PLN 164.8 billion. According to according to Bloomberg , new spending commitments and a drop in revenue forecasts and falling revenue forecasts could lead to the budget deficit in 2024 reaching the highest in recent years, UNN reports .
The plans for the coming days are quite clear and obvious, we must urgently start working on the budget. Obviously, it will be a demanding budget, but I am convinced that together with the employees of the Ministry of Finance we will be able to submit the draft budget on time, you will soon see the draft
Despite significant spending plans, Poland's borrowing costs have been kept under control since the elections on October 15, as the new administration promises to unlock almost 60 billion euros ($64.7 billion) in European Union aid that was delayed due to the previous cabinet's violation of the bloc's standards legislation.
The new cabinet will apparently not begin to consolidate the deficit until next year, as evidenced by the promises on spending by Prime Minister Donald Tusk in a speech to to the country's lawmakers on Tuesday.
In his speech Tusk promised not to cancel any social benefits introduced by the previous government, confirming that his cabinet would raise salaries for public sector workers, offer additional indexation of pensions if inflation exceeds 5%, and introduce new benefits for families with young children, and offer paid vacation for the for the self-employed. But Tusk did not specify how his cabinet would finance the new spending, which is further stimulated by rising defense spending amid Russia's Russia's war of aggression against Ukraine.
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Supplement
Economists Santander Bank Polska SA, MBank SA and Bank Millennium SA now expect that Poland's large fiscal gap will widen to more than 5% of gross domestic product next year next year from 4.5% in the current budget plan. A survey of analysts, conducted by Bloomberg shows that this year's deficit will be 5.2%. У 2020, when Poland eased policies to help companies cope with the the Covid pandemic and repeated lockdowns, the deficit reached 6.9%.
We assume that the public administration sector deficit could reach 6% of GDP
According to former Finance Minister Paweł Wojciechowski, the biggest macroeconomic challenge for Poland's economy macroeconomic challenge for the Polish economy in 2024 is whether it will be possible to accelerate economic growth and reduce inflation at the same time.
In this sense, the area of fiscal policy is important. The ratio of public debt to GDP remains at a good level, but it is worth remembering that we owe this primarily to inflation.
It is also pointed out that the new finance minister, Domanski, will be under time pressure to make amendments to the budget, as the parliament is to discuss the financial plan for the next year December 21.
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