Page 17 - Poland Outlook 2023

5.0 Fiscal policy outlook

The lower house of the Polish parliament, the Sejm, passed the 2023
budget bill on December 15. While the bill still has to go through the
opposition-controlled Senate, it is unlikely that it will be subject to any
major changes.

The budget bill assumes revenues at PLN604.7bn, which is 22% more
than in the previous year’s plan, the increase owing in large part to
inflation. Expenditure has been planned at PLN672.7bn, an increase of
28% versus the 2022 budget bill. The resulting deficit of PLN68bn
marks a whopping increase of 127.7% versus 2022.

The government assumes that the deficit of the public finance sector
will be 4.5% of GDP, while the debt of the general government sector
will come in at 53.3% of GDP.

The budget bill also assumes that GDP in 2023 will increase by 1.7
percent, and the average annual inflation will amount to 9.8 percent.
Both indicators are at odds with most forecasts, which predict growth of
around 1% only, while inflation is expected to average somewhere
between 13% and 14% (both forecasts are highly uncertain, given a
lack of clarity on the course of Russia’s war in Ukraine and Poland’s
tumultuous political year due to the election).

A key increase in budgetary spending plans is boosting outlays for
defence to 3% of GDP – 1pp above Nato-recommended level – as
Poland is building one of the EU’s largest and arguably most
technologically advanced armies. The context for that being obviously
Russia’s aggression against Ukraine.

Critics say that the budget bill does not tell the whole story of what the
government plans, expenditure-wise, in the new year. The bill does not
contain financial plans of state entities like the Polish Development
Fund, for example, which has led to accusations that the government is
channelling billions outside of the parliament’s control.

17 Poland Outlook 2023 www.intellinews.com