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The Warsaw Voice » Business » May 19, 2017
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IMF warns Poland
May 19, 2017   
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Poland should work to build a safety buffer against breaching the 3% of GDP public finance sector deficit limit and move towards the mid-term objective in 2023, the International Monetary Fund said in the annual Staff Concluding Statement.
"The 2017 budget deficit of 2.9% of GDP is only a shock away from the EU’s Excessive Deficit Procedure (EDP) limit of 3% of GDP," the IMF warns. "The fiscal policy priorities for this year are to avoid breaching the EDP limit and to save any revenue over performance from stronger-than-envisaged tax collection."
Poland should remain committed to plans of reducing the structural deficit by 0.5% of GDP each year in 2018 and 2019 in order to reverse the current pro-cyclical stance and to build a “safety buffer” relative to the EDP limit, the IMF advises.
The mid-term deficit objective at 1% of GDP should be reached no later than in 2023, considering the projected costs of aging society exacerbated by the retirement age cut, and in anticipation of subsiding EU funds.
On top of Poland's own "commendable" tax collection efficiency measures, additional fiscal consolidation measures could "include keeping the VAT rate at the current level beyond 2018, unification of multiple VAT rates, rationalizing current spending through expenditure reviews and gradually phasing out preferential pension regimes," the fund recommends.
Poland expects 2.9% to GDP general government deficit in 2017, 2.5% in 2018, 2.0% in 2018 and 1.2% in 2020, according to the country's most recent convergence program update.
According to the Statement, Poland is enjoying a "very strong" growth momentum but in order to maintain such growth rates longer-term, it needs to tackle the problem of declining working population, slow productivity growth and low private investments.
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