Budgeting for Crisis
September 28, 2012
The crisis may be knocking on its door, but Poland’s economy should be able to grow more than 2 percent next year, according to a draft budget approved by the government.
Under the 2013 budget bill adopted by the governing coalition of the Polish Civic Platform (PO) and the Polish People’s Party (PSL) in early September, government revenue is expected to total zl.299.18 billion and expenditure is set at zl.334.78 billion, with a resulting deficit of zl.35.6 billion,
Receipts from value-added tax (VAT) are expected to exceed zl.126 billion, 4 percent higher than in 2012, and receipts from excise tax are expected to reach zl.64.5 billion, 3.4 percent higher than this year. The target for revenue from CIT is zl.29.6 billion, 11.3 percent more than in 2012, and receipts from PIT are projected at zl.43 billion, 6.2 percent more than this year.
Moreover, under the bill, a new tax referred to as the mineral tax is expected to contribute zl.2.2 billion to national coffers.
As regards non-tax revenue, zl.5.8 billion is expected to come from dividends and profits generated by state-owned companies, zl.2 billion from customs duty, zl.400 million from profit generated by Poland’s central bank, the National Bank of Poland, and almost zl.20 billion from fees, fines, interest and other non-tax income.
The government assumes in the bill that the Polish economy will grow 2.2 percent next year and that inflation will be at 2.7 percent. Wages are expected to increase 1.9 percent in real terms and employment is projected to go up by 0.2 percent. The government plans to keep public-sector wages frozen.
“We will be defending the principle of a safe and sustainable budget, as we have done so far,” Prime Minister Donald Tusk said after the bill was adopted. He added that the government is planning no tax increases in 2013.
According to Finance Minister Jacek Rostowski, the situation in the Polish economy next year will be similar to that during the first wave of the crisis in 2008 and 2009. The government is ready for such a scenario, having prepared a cautious and conservative budget, Rostowski said. He added that the public deficit in 2012 should stand at 3.5 percent of GDP, while next year Poland should be able to avoid the EU’s excessive deficit procedure, which involves a series of measures launched when the budget deficit overshoots 3 percent of gross domestic product.
“The crisis that is knocking on our door is coming from the European Union,” Rostowski said. “The unfolding situation may turn out to be worse than we expect, but it might also turn out to be better. Depending on the situation, the government will be ready to respond.”
Beata Szydło from the opposition Law and Justice (PiS) party, deputy head of the parliamentary committee for finances, criticized the draft budget. She said the assumptions adopted by the government are “too optimistic and not very realistic” and that the planned budget revenue is overstated. “The receipts planned for next year are higher than those planned for this year, while it is already clear that the government’s revenue this year will be lower than planned because of lower income from VAT,” Szydło said. “Additionally, the level of unemployment, which is still increasing, is understated. The government plans that the unemployment rate will be around 13 percent next year. But we will probably reach this level before the end of this year and there are no signs indicating that unemployment will start falling. There are no signs suggesting a revival on the labor market.”