At the meeting of the Council of Ministers on September 29th, after social consultations, a draft of the budget for 2016 was passed. – The government confirmed that it is leaving the path of consolidating public finances, thus violating the obligations undertaken only a couple of months before, when the convergence program was last updated. This is not conducive to improving Poland’s trustworthiness, as our country has long had trouble meeting previously established budgetary targets – comments Łukasz Kozłowski, expert of Employers of Poland.
As early as 2011, Jacek Rostowski, then minister finance, announced that budgetary balance would be achieved in 2015. However, the unrealistic budget for 2013 has put an end to these plans – the government was forced to amend the budget and cover a significant part of existing shortages with increased deficit. 2014 proved much better in this regard which made a return on the path of fiscal consolidation relatively easy. After the excessive deficit procedure was withdrawn six years after its introduction, the decision makers’ willingness to sanitize public finances has markedly dropped. Passing the government’s draft of next year’s budget will result in worsening of the balance of government and local government institutions compared to the obligations undertaken a few months ago, in the most recent update of the convergence program. The balance would be at a level of -2.8 percent of the GDP. This would leave budgetary safety hanging in the balance. In such a situation, even a relatively minor macroeconomic shock could create excessive deficit. It should be kept in mind that removing extreme symptoms of imbalance in public finances does not mean that the government’s work is done, as the medium-term budget goal has been established at -1 percent of the GDP.
There is no better time to combat deficit than a period of good economic climate. Given a relatively good GDP dynamics and low cost of public debt maintenance, improving the condition of public finances does not require painful sacrifices. It will be enough if government expenses grow slower than income from taxes and other sources. This would create a safety margin, enabling the state to increase its debt when it really needs to.
Łukasz Kozłowski, economic expert of Employers of Poland