The State Bank assessed the state of the budget. Tax revenues fall significantly “due to the Polish order”

On Wednesday, Prime Minister Mateusz Morawiecki organized a press conference dedicated to the budget. The Prime Minister confirmed that the country’s financial situation is in good condition. He also responded to opposition criticism. He said that looking for negatives in the case of public money is an excuse for not fulfilling electoral promises.

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The budget situation became a cause for discussion after the Ministry of Finance published deficit data. In one month, it increased from 16 to 34 billion. This is the fact that Picao analysts pay attention to. The data shown by the Ministry of Finance sparked a heated debate about the state of public finances. The opposition wondered whether the government would be able to finance its planned loan needs for next year (gross 420 billion zlotys, net 225), not to mention the costs of pre-election promises.

“It’s a rather strange time for such a discussion, because The current implementation of the state budget is basically consistent with the assumptions of the July amendment. Let us remember that the state budget deficit for this year was assumed at PLN 92 billion (PLN 24 billion more than the original budget law). In light of this, the 34 billion PLN deficit in September does not seem particularly surprising,” say the bank’s analysts.

Government bank analysts wonder what went wrong in the 2023 budget? “Some worrying trends have also emerged in the area of ​​public finance. The most important of which is the erosion of tax revenues. These incomes in real terms are currently at the same level as they were in 2019, even though the economy has grown by roughly 10-15% since then. They also write in real value.

The cost of the Polish system’s reforms turned out to be higher than the Ministry of Finance initially estimated Bankers say it is this tax that contributes most to the budget gap.

They confirm this throughout 2023 This is the same as in 2021, even though the wage bill in the Polish economy rose by 30% at that time. “In the budget amendment in July, the budget was supposed to receive PLN 83 billion from the personal income tax levy,” they add.

In July, the Ministry of Finance also assumed PLN 260 billion from it. Implementation so far indicates that it will likely be PLN 10 billion less, and the blame for this lies not only in the zero VAT on food, but also in weaker consumer demand than previously expected. Bankers stress that “this year’s deficit is unlikely to be in danger, as the income gap is likely to be offset by a slight reduction in budget expenditures.”

Pekao also provides forecasts for 2024. Pekao analysts emphasize that the lack of a positive surprise in the implementation of the 2023 budget forces us to take seriously the high deficit planned for next year: PLN 164 billion. Budget borrowing needs should be larger: PLN 225 billion.

They also claim that these are amounts that can be financed. a reason? “Poland’s public debt is so low – around 50 percent of GDP compared to 91.5 percent of GDP in the eurozone – that financial markets are not concerned about the stability of our country’s public finances,” they wrote.

Bankierzy podkreślają przy tym, że sfinansowanie wspomnianych potrzeb pożyczkowych będzie wymagać wzrostu podaży obligacji skarbowych na aukcjach “o kolejne 50 proc.”. They admit that it is not clear which group of investors will take on this additional offering.

Therefore, we do not see much financial space to implement pre-election promises next year (For example, doubling the amount of tax exemption), the total cost of which is estimated at approximately 3%. gross domestic product. Unless the government decides to reduce spending

In their opinion, the possible quick release of funds from the KPO may also bring some relief to the budget – part of next year’s borrowing needs will be the cost of pre-financing investments planned under this program.