Stronger economic growth has increased tax revenues in Poland, allowing the government to boost spending plans on healthcare, infrastructure and higher education. The state now expects its income this year to be 78.5 billion zloty (€17 billion) higher than originally forecast.
According to its new budget plan, which the government announced on Tuesday, Poland’s GDP growth forecasts have been revised up from 4% to 4.8-4.9%. It now estimates that revenue this year will reach 483 billion zloty (€105 billion), compared to the 404.5 billion (€88 billion) initially anticipated.
This is largely driven by higher tax revenues, which have increased steadily in the past few years, from 259.7 billion zloty in 2015 to 424.8 billion zloty in 2021.
W nowelizacji #budżet.u na ten rok prognozujemy dochody podatkowe ogółem w wysokości 428,8 mld zł. To o ponad 55 mld zł więcej niż zaplanowane w ustawie #budżet2021 (369,1 mld zł).📈 pic.twitter.com/1tUDAYLYas
— Ministerstwo Finansów (@MF_GOV_PL) September 21, 2021
According to its new forecasts, this year the state will collect 71.3 billion zloty as personal income tax (up from the previously anticipated 69.3 billion zloty), 49.5 billion zloty as corporate tax (up from 37.1 billion zloty), and 214.5 billion zloty as VAT (up from 181 billion zloty).
As a result, the deficit will shrink from an anticipated 82.3 billion zloty (€18 billion) to 40.4 billion zloty (€9 billion).
There have been signs of economic recovery from the pandemic lockdowns, as Poland recorded GDP growth of 11.1% year-on-year in the second quarter of 2021, according to Statistics Poland (GUS), a government agency. That represents the largest single increase since such records began in 1995.
In July, Poland’s forecast GDP growth was also revised up by the International Monetary Fund (from 3.5% to 4.6%) and European Commission (from 4% to 4.8%). But the latter lowered its forecast for 2022 from 5.4% to 5.2%.
Along with growing inflation – which had initially been forecast at 1.8%, but is now predicted to be 4.3%, as it reached its highest level in over two decades in August – the new estimates have also led officials to revise their spending plans. These will increase from 486.8 billion zloty (€105 billion) to 523.4 billion zloty (€113 billion).
Higher spending will bolster local government budgets (by 12 billion zloty), as well as investment in infrastructure (by 10.1 billion zloty), healthcare and higher education (by 1 billion zloty each), and the police, border guard and fire services (2.2 billion zloty).
✅ Nowelizacja budżetowa ⤵️ pic.twitter.com/klLGdYBdaD
— Kancelaria Premiera (@PremierRP) September 21, 2021
The government said it would not tighten its fiscal policy so as not to cool growth. Such a loose approach has also characterised the country’s monetary policy, as the central bank has kept its key interest rate unchanged at 0.1% since May 2020.
Hungary and the Czech Republic, which have experienced similar levels of inflation as Poland, have increased their rates in the past months. At the same time, the government is facing criticism that its Polish Deal stimulus programme could further raise price levels.
Morawiecki said that fiscal restraints, which are required by the constitution and EU rules, will return in 2023 when higher spending related to the coronavirus pandemic “should be naturally phasing out”.
.Main image credit: Adam Guz/KPRM (under CC BY-NC-ND 2.0)
Maria Wilczek is deputy editor of Notes from Poland. She is a regular writer for The Times, The Economist and Al Jazeera English, and has also featured in Foreign Policy, Politico Europe, The Spectator and Gazeta Wyborcza.
