Poland Adopts 2024-2027 Financial Plan with GDP Growth Above 3% Amid EU Deficit Scrutiny

Poland's Council of Ministers has adopted the 2024-2027 Multiannual Financial Plan, which projects GDP growth above 3% and a gradual reduction in the budget deficit. The plan, developed based on the Public Finance Act, provides a preliminary forecast of key macroeconomic indicators and sets the main objectives of state functions along with indicators to measure their implementation.

According to the plan, the Polish economy is expected to grow by 3.1% in 2024, 3.7% in 2025, 3.4% in 2026, and 3.0% in 2027. Average inflation is projected to decrease from 5.2% in 2024 to 2.5% in 2027. The government also forecasts unemployment to fall to 5% by the end of 2024 and 4.9% in 2025, with average wage growth at 11.9% in 2024 and 7.1% in 2025.

The general government deficit is projected to decrease from 5.1% of GDP in 2024 to 3.3% in 2027. However, government debt is expected to rise from 53.4% of GDP in 2023 to 61.3% in 2027. The high deficit in 2023 was attributed to increased defense spending and measures to mitigate the effects of the energy crisis and aid for Ukrainian refugees.

Why this matters: Poland's financial plan comes amid EU scrutiny over its 5.1% deficit in 2023, which exceeded the bloc's guidelines. The country's commitment to gradual deficit reduction and maintaining debt below the constitutional 60% of GDP limit will be essential in guiding its economic future and relationship with the EU.

The government aims to gradually reduce the structural deficit by an average of 0.5% of GDP per year from 2025 onwards. The plan also includes the establishment of a Fiscal Council to monitor budget implementation and provide opinions on macroeconomic forecasts, as required by changes in EU fiscal rules. "The Multiannual Financial Plan no longer includes the 'Convergence Program' as the relevant EU regulations that required its preparation have expired," the Ministry of Finance stated.

Key Takeaways

• Poland projects GDP growth above 3% from 2024-2027, with gradual deficit reduction.
• Inflation expected to decrease from 5.2% in 2024 to 2.5% in 2027, unemployment to fall.
• Deficit to decrease from 5.1% of GDP in 2024 to 3.3% in 2027, but debt to rise.
• Poland's plan aims to meet EU fiscal rules, including establishing a Fiscal Council.
• Poland's financial plan comes amid EU scrutiny over its 2023 deficit exceeding guidelines.