Poland’s to keep budget deficit below EU cap

Bloomberg

Poland plans to keep its 2017 budget deficit below the European Union’s limit of 3 percent of gross domestic product even as a report showed the government revising down its outlook for economic growth.
The shortfall is planned at 2.9 percent of GDP, the Finance Ministry said on its Twitter account on Monday. That compares with a 2.6 percent deficit expected this year, according to Puls Biznesu daily, which published the ministry’s 2017 assumptions. Forecasts reported by the newspaper include economic growth at 3.6 percent next year and 3.4 percent in 2016, revisions from earlier plans of at least 3.8 percent.
While Poland’s nine-month-old government needs to accelerate economic growth to help pay for its family benefits and plans to reduce the retirement age next year, it’s struggling to do so after imposing new taxes and banks and retailers. The figures published by Puls Biznesu, which haven’t been confirmed by the Finance Ministry, envisage a freeze in budget outlays relative to the size of GDP, which may be difficult given spending plans.
“We don’t have all the figures, but the proposed spending level would actually mean a reduction relative to GDP, which at first glance is questionable,” Jakub Rybacki, an economist at ING Bank Slaski SA in Warsaw, said by phone.
The Finance Ministry had no immediate comment on the Puls Biznesu report. Breaching the EU’s budget deficit limit would threaten the flow of 82.5 billion euros ($93 billion) in funds earmarked for Poland through 2020.
The newspaper said Poland’s budget revenue would grow by about 10 billion zloty next to 324 billion zloty ($85 billion), with value added tax inflows rising 11 percent to 143 billion zloty thanks in part to better tax collection, a priority for Finance Minister Pawel Szalamacha.
The revised GDP figures still assume the economy will pick up in the second half and in 2017 after growth of around 3 percent in the first six months of this year.
“There’s a growing risk in the context of economic results as growth may turn out lower than expected,” Grzegorz Maliszewski, the chief economist at Bank Millennium SA in Warsaw, said by phone. ”Meanwhile, additional revenues are supposed to come from better tax collection, which is another risky assumption