Macroeconomic Forecast Poland

October 2006 | Macroeconomic Forecasts

BMI View: August's budget figures showed a cumulative deficit of PLN14.5bn, or just under 50% of the full-year plan, leading Finance Ministry officials to suggest the 2006 shortfall could even come in under the PLN30bn target. For now, however, we are maintaining our PLN32bn projection, which is equivalent to 3.1% of GDP. Expenditures, already at 63.2% of the full-year's plan, are set to accelerate in H206, as co-financing for many EU-funded projects falls due in the second half. A 30% pay increase for doctors is also scheduled to take effect from October, and pressures for increased spending on education and welfare benefits will remain, from minority coalition partners LPR, and defected members of the Self-Defense party in government. Next year's budget has been the catalyst for the country's political ructions, and is almost certain to be more expansive than that of 2006. The situation will be compounded by EU rules stating the cost of pension reforms must be included in the 2007 figures. BMI is forecasting a deficit in excess of 4% of GDP next year.

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