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The Warsaw Voice » Business » August 2, 2010
Business & Economy
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Government Adopts Budget Targets
August 2, 2010   
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Poland’s gross domestic product is expected to grow 3.5 percent next year, under a set of 2011 budget targets approved by the government in early July.

The average annual inflation target for next year was set at 2.3 percent and unemployment is expected to reach 9.9 percent at the end of 2011. The average monthly wage is projected to rise by 3.7 percent in nominal terms, to zl.3,359. In real terms, the average wage is expected to be 1.4 percent higher than this year. No pay raises are planned in the government sector. Domestic demand, seen as the main driving force behind the economy this year, is expected to rise next year. The government wants to limit the growth of so-called flexible expenditure as well as new fixed expenditure to 1 percentage point above the inflation rate.

“These assumptions are realistic,” said Małgorzata Starczewska-Krzysztoszek, chief economist at the Lewiatan Polish Confederation of Private Employers, an influential business association. “The government stopped short of making unrealistically high projections for GDP growth and inflation as the basis for the budget targets. But whether the economy will indeed grow by 3.5 percent next year depends to a large extent on the external environment. It is difficult to predict how other European countries will cope with their high public finance deficits and how austerity programs in these countries will influence internal demand. However, the most important factor for the Polish economy will be internal demand in Poland.”

Experts say it will be difficult to bring unemployment down to 9.9 percent by the end of next year from 11.6 percent today. “The economy would have to grow at a faster rate than 3.5 percent in order to absorb the 300,000-plus army of unemployed people,” Starczewska-Krzysztoszek says. “It is also difficult to estimate the increase in wages. Their average growth will be reduced by the pay freeze in the public sector.”
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