Poland to increase budget deficit after economic slowdown

Donald Tusk (centre) with economy minister Janusz Piechociński (left) and finance minister Jacek Rostowski during press conference, Tuesday: photo - PAP/EPA/Radek Pietruszka

Poland's economy has slowed more than expected this year, which will mean shortfalls in expected revenue.

“We have to decide how to cover this shortfall. We would be willing to increase the budget deficit by about 16 billion zlotys and cuts in the ministries would amount to 8.5 to 8.6 billion zlotys," Tusk said on Tuesday.

The Polish currency, the zloty, increased in value against major currencies after the announcement.

Donald Tusk added that the government will be seeking ways to make cuts in public expenditure which will not hit Poles' pockets and spending power.

In order to loosen fiscal discipline, an amendment to the 2013 budget law must pass through parliament.

The IMF predicts Poland's economic growth this year will be just 1.2 percent, rising to 2.2 percent in 2014.

Finance Minister Jacek Rostowski told Polish Radio on Wednesday morning that the economic slowdown plus the Monetary Policy Council's reluctance to cut interest rates more aggressively last year has resulted in a hole that needs to be plugged in the budget.

The MPC “should have but rates faster and deeper,” he told Polish Radio Three.

The MPC announced that the cycle of cuts – amounting to 2.25 basis points over the last year – would end after another 0.25 percentage points was cut from the borrowing rate in July.

But Rostowski has been critical that the rate cuts have been “too little, too late”. (pg)

source: PAP/Reuters