Polish government tables no-deficit budget for 2020

Polish government tables no-deficit budget for 2020
/ Filip Bramorski
By Wojciech Kosc in Warsaw August 28, 2019

Poland’s government on August 27 approved a draft budget for 2020 that will be the country’s first in three decades without a deficit.

Defying predictions that billions in social spending will lead to ballooning deficits in the state coffers, Poland’s ruling populists managed to draft and execute increasingly low-deficit budgets since 2015. That was possible thanks to an economic boom and efforts to improve the collection of taxes, VAT in particular.

Critics of the government argue, however, that the ruling Law and Justice (PiS) party will amend the budget if it wins the general election – due on October 13 – because maintaining costly social spending programmes would not be possible without a deficit, especially if the economy slows down, which most analysts predict is about to happen.

The proposed budget assumes economic growth of 3.7% in 2020 and inflation at 2.5%. Growth came in at 5.1% in 2018 and is forecast at around 4% this year.

Budget revenue will equal spending at PLN429.5bn (€98.17bn) in 2020, according to details made public by the ministry of finance. That means only a marginal growth in expenditure compared to 2019 and a huge increase in revenue, most of which will be one-off income such as the fee the government wrote into the coming pension reform, sales of emission allowances or 5G frequencies.

The PiS government will maintain its flagship 500+ programme of unconditional child benefit of PLN500 for each underage child. Around PLN5bn will be added to defence expenditure. More will also be spent on health care or the restoration of public bus transport in small town and villages, the government claims.

The overall general government deficit is expected at 0.3% of GDP in 2020, compared to 1.5%-1.8% of GDP expected in 2019.

The draft, presented on August 27 during the government’s weekly sitting, contains no proposals to hike or introduce new taxes, which PiS said earlier this year would be necessary to finance a new wave of state spending, the newspaper claimed, citing sources in the government.

That suggests PiS is wary of stirring controversy just seven weeks before the general election that the ruling party hopes to sweep to victory to ensure another four years in power.

But the right-wing populists appear shakier than ever after media exposed officials from the justice ministry to have orchestrated an online smear campaign targeting judges critical of the government’s reform of the judiciary. The scandal has brought about a fall in the popularity of PiS in the polls already.

The no-deficit budget could therefore be a campaign stunt to improve the party's standing in the polls, critics have said.

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