The general government deficit in ESA2010 terms will be “clearly better” this year than the 5.3% of GDP assumed by the government, believes the Monetary Policy Council (MPC). According to her, in 2022 the deficit of the public finance sector will be “significantly lower” than the EU reference value of 3% of GDP.
According to the government’s forecast included in the autumn fiscal notification, the general government deficit in ESA2010 terms throughout 2021 is to amount to 5.3% of GDP.
Taking into account the very low deficit of the sector recorded in the first half of this year, the continued high dynamics of tax revenues of the state budget in the third quarter, and the macroeconomic conditions favorable to the budgetary situation, it can be expected that the full-year result will be clearly better than indicated by the aforementioned forecast, according to the “Opinion of the Monetary Policy Council on the draft ‘Budget Act for 2022′”.
In the first half of 2021, the general government deficit in ESA2010 terms amounted to 0.2% of the GDP forecasted for 2021, which was one of the best results among the European Union countries – the average deficit in the EU countries amounted to 3.3 % Of GDP, the MPC emphasized.
Economic policy, including fiscal policy, continues to function in conditions of heightened uncertainty regarding the further course of the COVID-19 pandemic. economic activity than it was until mid-2021.
According to the Council, this means that in the pandemic and macroeconomic development scenario adopted in the draft Act, extraordinary fiscal measures supporting economic entities under administrative restrictions, which in the vast majority expired in the first half of 2021, will not be resumed in 2022.
“This will be a factor significantly lowering the level of expenditure and the deficit of the public finance sector. According to NBP estimates, the value of the above-mentioned support in 2020 amounted to 4.1% of GDP, this year it will reach approx. 1% of GDP, and in 2022 it will be close zero (it will only include the cost of the tourist voucher),” it was also indicated.
With the expiry of the anti-crisis support instruments, the most important change in the fiscal policy in 2022 will be a significant modification of the income tax burden on individuals and the health contribution as a result of changes introduced under the “Polish Deal” program, the MPC said.
“For the majority of taxpayers, mainly from lower income brackets, these changes will lead to an increase in disposable income, and thus support the growth of consumer demand. Based on the information contained in the impact assessment of the draft act introducing these changes, it can be estimated that the changes the tax scale and the rules for deducting health insurance contributions will jointly result in a loss of revenues of the public finance sector in the amount of 0.6% of GDP “, it further expressed.
The current forecasts of the National Bank of Poland (NBP) indicate that public spending in relation to GDP in 2022 will drop significantly, which will mainly result from the abovementioned expiration of anti-crisis measures. However, also after adjusting for these measures, public expenditure will grow in 2022 at a slower pace than nominal GDP.
“The growth rate of total public expenditure will be reduced in particular by the relatively low growth rate of expenditure on social cash benefits, which, according to NBP forecasts, will amount to 4.8% next year. This will be driven by the expected decline in the number of beneficiaries of unemployment benefits and family In addition, in the case of most social benefits, the indexation ratio will be lower than the forecast nominal GDP growth.An additional factor lowering the growth rate of expenditure on benefits in 2022 will be the expiry of the so-called 14th retirement pension, paid once in 2021. this title will be partially compensated by the payment of a new benefit for families with children (the so-called Family Caring Capital) and an increase in expenditure on energy allowances “- it was written in the” Opinion “.
According to the MPC, after a large increase in the public finance imbalance in 2020, a significant improvement in the public finance situation can be expected in the years 2021-2022.
“Despite the costs of implementing the ‘Polish Deal’ program, the current NBP forecasts indicate that in 2022 the public finance sector deficit will be significantly lower than the EU reference value of 3% of GDP. This applies to both the nominal deficit and the structural deficit. public finance”.
The Council also points out that despite a significant increase in the debt of the public finance sector in the first half of this year, the high rate of nominal GDP growth will cause the public debt to GDP ratio to decline this year.
According to the “Strategy for managing the debt of the public finance sector in the years 2022-2025” attached to the draft Act – the ratio of public debt (PDP) to GDP will decrease from 47.8% at the end of 2020 to 45.4% at the end of 2021 and the ratio of general government debt (ESA2010) to GDP – from 57.5% at the end of 2020 to 57% in 2021. In 2022, a further decrease in the aforementioned ratio – PDP debt to 43 is expected, 8%, and the debt in terms of ESA2010 – up to 56.6%. According to the NBP, these forecasts are cautious in nature, similar to the forecast of the sector deficit for 2022, it was also indicated.
Source: MPC and ISBnews
