Page 14 - bne_newspaper_March_01_2019

Central Europe
March 1, 2019 www.intellinews.com I Page 14
Poland’s PiS offers multi-billion spending stimulus in election year
Wojciech Kosc in Warsaw
Poland’s ruling conservative party Law and Justice (PiS) pledged a multi-billion zloty plan of additional spending and reliefs ahead of elections taking place this year, the party’s chairman Jaroslaw Kaczynski and other decision makers announced on February 23.
While expectable in an election year, the move still seem a direct reaction to recent consolidation of the opposition parties that have formed a so- called European Coalition to run against PiS in the European election in May. The coalition is level with PiS in the polls although its agenda is not much more than ousting the incumbent populists.
Announcing the plan has also given PiS a political initiative over opposition, which – while having adopted some of the PiS-favoured ideas like the universal child benefit – is unable to implement any promises it might make.
Tellingly, PiS has launched a video advert that is a compilation of older statements by Civic Platform (PO) politicians – Poland’s former ruling party – saying the so-called 500+ child benefit, PLN500 (€115) paid per most children in Poland, was impossible and irresponsible to introduce.
Yet the benefit was indeed delivered by PiS and while its cost runs over PLN20bn each year, Poland’s economic growth – 5.1% in 2018, the fastest since 2007 – easily allowed it. The benefit –
first of its kind in Poland – changed Polish politics, contributing to PiS' victory in the 2015 election and keeping the party top of polls since.
The new spending plans amount to some PLN- 30bn-40bn and are risky, some economists and analysts say. Poland’s economy is expected to slow down to 3.5% in 2019 and the election-driven fiscal stimuli will lead to an increased deficit, they claim.
The changes include extending the monthly benefit of PLN500 also for the first child without the income threshold, starting in July, introducing an extra annual payment for pensioners of PLN1100, no personal income tax for employees under 26 years, as well as lower tax payments for other employed.
Prime Minister Mateusz Morawiecki said the
cost of the changes would be financed through further sealing of the tax system and cutting administrative costs. He also said more promises would be made in June and July.
“Such an increase in spending implies that this year's deficit could reach the legal threshold
of 3% of GDP, compared to the planned 1.7%, according to RBI.
“The plan, therefore, increases fiscal risks especially given the expected economic slowdown,” the Austrian bank said.