On Thursday 27th August, the Polish Ministry of Finance presented a draft budget for 2021 that resulted in a predicted deficit of €18.6b EUR, with Polish government debt climbing to 64.7% of GDP in 2021.
The draft budget called for increased spending on:
• Defence – rising from 2.1% to 2.2% of GDP in 2021 (rising to 2.5% by 2030)
• Health care – up from ~5% to 5.3% of GDP (rising to of 6% by 2024)
• Pension indexation – increasing by 3.84%
• A specific child benefit payment program (“500+”) – amounting to €9.3b
Thursday’s announcement follows on from news last week that the once balanced budget of 2020 would be significantly adjusted to reflect a decline in GDP of -4.6%, resulting in a €24.8b deficit.
The combined €43.4b deficit for 2020 and 2021 is a significant hit to Polish finances however with GDP growth in 2021 predicted to be above 4% and inflation rising somewhere between 1.8% and 2.3%, market confidence remains high.
For reference Poland’s GDP in 2019 reached around €520b – depending on the method of currency conversion.