National Public Debt rose sharply as COVID-19 struck

The National Public Debt at the end of the first quarter of 2020 rose by 5.5 percent or PLN 54.5 bn (12.5 bn), the Finance Ministry announced. According to earlier reports the Ministry will announce a review of its budget in July.

The main growth component in the debt was an increased state treasury borrowing of 55 bn, which was the equivalent of 6.1 percent.

At the same time, local government debt decreased by 1.1 percent.

The budget deficit for the first five months of 2020 was PLN 25.9 (EUR 5.8 bn), it was announced last week. The figures showed that while corporate profit tax revenues were up, VAT compared to the previous year fell by over 7.1 percent and by 33 percent in May.

The government is forecasting a contraction of four percent for the year, but the hardest impact of the downturn is likely to be in the second quarter. Finance Minister Tadeusz Kościński suggested to PolandIn during lockdown that the drop in GDP could be as high as 10 percent for the three months up to June, which suggests that overall National Public Debt is going to get worse before it gets better.

To tax or not to tax

During the election hustings on Tuesday opposition presidential candidate Rafał Trzaskowski complained about the “Morawiecki hole” in public finances, referring to the Prime Minister, Mateusz Morawiecki, a deficit which he said was “getting bigger”. The current Warsaw Mayor vowed to veto any plans for the government to increase taxes to pay for the deficit.

Mateusz Morawiecki responded to journalists later that there would be no tax increases and in fact the government was planning to lower personal taxes next year.