Government updates budget as GDP growth is expected to slow to 0.2%

2009-06-26



The government on 23 June unveiled steps to address the funding shortfall brought about by the economic downturn. Finance minister Jacek Rostowski decided to increase the budget deficit and order additional spending cuts, but stopped short of raising taxes.
The Finance Ministry now expects the Polish economy to grow by just 0.2% this year, compared to a forecast of 3.7% growth on which the 2009 budget bill was premised. As a result, budget revenues are projected to be PLN 37bn (approx. €8.2bn) lower than initially estimated. To close this gap, the government aims to increase the budget deficit by nearly PLN 9bn (€2bn) to PLN 27bn (€6bn), as well as to implement spending cuts across government departments of PLN 22.7bn or €5bn (this includes cuts worth PLN 19.7bn or €4.4bn that were already introduced in the early part of the year). Rostowski was quick to emphasise, however, that the cuts would not affect the motorway construction programme, seen as a growth-supporting factor. Finally, the government intends to extract much higher dividend pay-outs from companies in which it owns stakes: this will bring an additional PLN 5.3bn (€1.2bn).
Rostowski said that he did not expect another budget revision later this year, “barring some disaster”. But he did not rule out tax hikes in 2010.
The government is to approve a relevant bill on 7 July.