Jacek Rostowski and Donald Tusk envisage 2.2 percent GDP growth for next year premier.gov.pl

The Polish government approved a draft budget for 2013 last week, envisaging 2.2 percent GDP growth for next year, a significant downgrade from the 2.9 percent growth assumption contained in its previous forecasts.

The government expects the budget deficit to come in at zł.35.6 billion – only slightly higher than the zł.35 billion planned for this year, despite the significantly weaker economic growth prospects.

The projections appear optimistic in the light of the worsening economic outlook, with many economists expecting growth of 2 percent or lower in 2013. Moreover, Finance Minister Jacek Rostowski said at a conference last week that he didn’t foresee any tax increases next year, leading analysts to question where revenues would come from.

“This change of macroeconomic assumptions means making them more realistic, but they still cannot be described as conservative in the context of the recent deterioration [of the] economic outlook,” Bank Zachodni WBK chief economist Maciej Reluga wrote in a report.

Mr Rostowski said that the new macroeconomic assumptions are “realistic,” adding that the budget is based on “the most important principle in these dangerous times in Europe, which is ensuring security for the Polish economy.”

The government is under pressure to reduce the deficit-to-GDP ratio, but has limited room for maneuver since it will need to balance cuts in spending against the damage they could do to the economy.

“The central budget deficit was set more or less at the same level as in 2012, which suggests that the general government deficit will not be cut to 2.2 percent of GDP as planned earlier,” BZ WBK wrote, referring to the government’s unchanged plan to reduce the deficit to 2.2 percent of economic output.

“Still, under circumstances of a considerable deterioration of the economic climate in the whole of Europe we do not think that this [will] diminish the [international] assessment of Polish fiscal policy,” the bank added.

Mr Rostowski and Prime Minister Donald Tusk both admitted that for this year, it won’t be possible to lower the public deficit below the 3 percent limit set by the EU, and have instead set a target of 3.5 percent of GDP.