“Summary of all the above changes, the implementation of the draft act adopted by the government and the maintenance of the current legal status in relation to the fiscal protection measures introduced in 2022-2023 in response to external price shocks, deficits in the financial sector can be expected. In 2024, the state funds should remain at the same level as the previous year (in relation to the GDP)”, we read in the conclusion of this year's draft budget act.
Deficit of the public finance sector
According to this year's draft budget, the so-called general government sector deficit may be below 5.6% by 2023. GDP is at the expected level at the stage of preparation of the autumn fiscal report, and in 2024 it will be 5.1 percent; On the other hand, the debt of the general government sector will increase to 54.2%. GDP in 2024 compared to 49.3 percent of GDP in 2023
“The draft act adopted by the Council of Ministers does not provide for the financing of some legislative changes, the entry into force of which was announced in the exposition of the Prime Minister or other members of the Council of Ministers in 2024. These changes include The introduction of a holiday from social security contributions for entrepreneurs, a senior voucher to finance support for the elderly and supplements to family pensions (the so-called “widow's pension”). The justification of the bill also does not take into account the costs of these activities, therefore there is a risk that the implementation of these changes will contribute to the increase of the deficit of the public finance sector, moreover, as mentioned above, it cannot be excluded that the support of households in the field of energy costs will continue until the second half of 2024 , which will also contribute to the growth of the deficit sector,” the statement said.
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The MPC also noted that there is a significant increase in the average interest rate on government debt in 2022-2023, driven by increases in short-term and long-term interest rates in Poland and other developed countries.
“The average interest rate cost of public debt in ESA terms has risen from just over 2% in 2021 to almost 5% in 2023. Assuming the current expectations of the financial markets regarding the further development of market interest rates, stabilization may occur. The average debt interest rate is expected in 2024,” the opinion reads.
“Available forecasts indicate that despite the above-mentioned increase in the average interest rate on public debt, it will actually remain below the potential growth rate of the Polish economy.” This will be a limiting factor for the stability of the state debt. In the long term, however, taking into account the forecasts of the increase in the ratio of public debt to GDP, in order to stop this trend, it is desirable to take actions aimed at reducing the primary structural deficit of the state. public finance sector”, the council concluded.
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