Govt approval given for 2021 “Growth Budget” assumptions

The Polish Cabinet approved the guidelines for next year's budget prepared by the finance minister, envisaging 4-percent GDP growth and inflation of 1.8 percent on Tuesday, the Government Information Centre (CIR) reported. The budget draft is to be presented to the Social Dialogue Committee on July 31.

Emphasis on spending and taxation is to be placed on rebuilding Poland's economic potential, according to the CIR statement. It was underlined that prospects for the Polish economy depended on the development of the global crisis caused by the COVID-19.

The latest Finance Ministry forecast for this year’s economy is a fall in GDP of 4.6 percent. This will be followed by growth of 4 percent in 2021, supported by domestic demand. Inflation is forecast at 3.3 percent at the end of 2020 and 1.8 percent in 2021.

The budget assumes that average employment will drop by 2.4 percent in 2020, and by 0.7 percent in 2021.

The unemployment rate is expected to grow to 8.0 percent at the end of 2020, compared to 5.2 percent at the end of 2019. However, in 2021, the joblessness rate will drop to 7.5 percent.

One important element driver of growth - private consumption- is touted to drop by 4.2 percent in real terms in 2020, only to grow by 4.4 percent in 2021.

Meanwhile, the Ministry of Finance is assuming Poland's exports will fall by 9.3 percent in real terms in 2020 and then increase by 6.9 percent in 2021.The final balance of payments position will improve a notch, however, as imports will drop by 10.2 percent this year. However, imports growth of 7.3 percent next year will exceed the growth of exports.

The minimum wage in 2021 is planned to amount to PLN 2,800 (EUR 622), up by 7.7 percent year on year, which is less than had been envisioned last year. Hourly pay is to stand at PLN 18.30 (EUR 4.1).

The government will present the assumptions for the draft 2021 budget to the Social Dialogue Council on July 31.