Poland: Expansive fiscal programme ahead of autumn elections

The Polish government is pursuing a very expansive fiscal policy course before the parliamentary elections in autumn. The package of tax relief and bonus payments amounting to up to 1.9% of economic output announced in February has been put into concrete terms and partially implemented in recent months. The fiscal program is apparently intended to guarantee the re-election of the national conservative governing party PiS. The measures include an increase in child benefit, a bonus payment to all pensioners in the country and a reduction in income tax.

Private consumption in particular will therefore provide solid growth in Poland in the current and next year. The economy is expected to grow by nearly 4% in 2019 and by about 2.5% in 2020. However, the Eastern European country will not be able to sustain last year’s exceptionally high economic momentum. Due to the high dependency on the German economy, the industrial sector is already suffering, which in Poland contributes about a quarter of the value added.

Despite the robust growth rates, which actually give some financial room for manoeuvre, expansionary fiscal policy will probably leave its mark on the budget. The gap in the national budget that was almost closed last year is likely to widen significantly again in 2019 and 2020. However, the Maastricht targets for general government debt and the budget deficit are likely to be comfortably met.

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