Poland adopts multi-year financial plan for 2014-17
April 23, 2014
Poland's PM Donald Tusk
The Polish government adopted the multi-year financial plan for 2014-2017, with this year's GDP growth expected at 3.3%, average annual inflation at 1.2% and unemployment rate according to EU count at 9.8%, the government said in a press statement released after the cabinet sitting.
GDP growth is expected to accelerate to 3.8% in 2015 and to stabilize at 4.3% in 2016-17. Average annual inflation will gradually return to the monetary target level, but fall temporarily to 2.2% in 2017 when VAT rates return to 22% and 7%, the statement showed.
Unemployment by EU count will likely fall to 9.3% in 2015 and further to 7.9% in 2017, the cabinet said.
The government is plotting further fiscal tightening, with a one-off general government surplus in 2014 at 5.8% of GDP and a deficit of 2.5% in 2015, based on ESA'95 count.
According to the plan the government plans to obtain PLN 121 billion or 7.1% of GDP in revenues from income and property taxes in 2014.
By 2017, the amount is seen rising to 7.6%. The freeze on income tax scale will be maintained in 2015 and most likely further, until end-2017, which should translate into additional budget revenue of about 0.1% of GDP a year, the daily Rzeczpospolita writes.
Poland also plans to introduce social insurance premiums for civil law labor agreements which could bring about PLN 1.5 billion a year to the state coffers. Pensions will be indexed by the inflation rate plus 20% of real wage growth, while university teachers' salaries will be hiked by 30% by 2015.
VAT rates will be reduced by 1 ppt in 2017.
Macro economic forecasts included in the plan and the update to convergence program, which constitutes an initial forecast used for the planning of next year's budget, "should be sent to the trilateral Commission by May 10," deputy Finance Minister Janusz Cichon said.
The convergence plan to be sent to the European Commission will show Poland leaving the EU's excessive deficit procedure in 2016, Cichon said.
Poland plans PLN 47.5 billion budget deficit for 2014. Poland expects to sport a 2014 general government deficit of 3.5% of GDP and a 2015 deficit of 2.7% according to ESA2010 methodology, Finance Minister Mateusz Szczurek told reporters last week, citing convergence program update parameters.