In an interview with PAP The head of the Polish Development Funds, Pawe Boris, spoke about the draft budget for 2024 and progress in the implementation of the National Reconstruction Planwhich is currently pre-funded by the Political Finance Watchdog (PFR).
– In my opinion, the budget was prepared in a conservative manner. It can also be seen from the reaction of the financial markets that they quietly approved the budget. And then We did not encounter any negative reception or investor concerns about potential problems in borrowing financing needs. Polish treasury bond yields fell, and the zloty stabilized He said.
According to the draft budget for the year 2024 approved by the government, The budget deficit is not to exceed PLN 164.8 billion, and the fiscal deficit must not exceed 4.5 percent of GDP. gross domestic product. This is more than what the Finance Ministry previously mentioned in the Convergence Program Update it sent to the European Commission, where the deficit for 2024 was estimated at 3.4%. gross domestic product.
– And let us remember that this project comes in implementation of the Prime Minister’s statements regarding the unification of public finances and the inclusion of anti-crisis financing in the budget. Away from this We have a war in Ukraine and that’s why military spending is a big priority. Currently, Poland spends the most on armaments of the GDP of all NATO countries, at up to 4 percent. gross domestic product. If we were spending the same amount as Germany, that is, less than 2 percent. GDP, the budget deficit reaches 2.5%. gross domestic product. The PFR president stressed that spending on the army is essential.
– Investors are not surprised by these expenses. He added that they are aware that Poland will implement during the next few years a major program to modernize the armed forces.
In the opinion of Powell Boris Increase in 2024 budget expenditures – which was planned for PLN 848.3 billion, so it is planned to increase by about PLN 155 billion compared to this year’s budget after adjustment – As a result of the need to stimulate the economy.
– It is worth remembering that We are going through a cycle of economic slowdown, and we have a recessionary environment, especially with our main partner, Germany. In this case, there was some fiscal stimulus aimed at stimulating the economic situation and achieving GDP growth at a level exceeding 3%. – Which I consider realistic – is justified – said Powell Boris.
– There is also a high probability that the deficit will eventually be less than that stipulated in the draft – He evaluated.
The draft budget for 2024 provides for no changes in interest rates, and at the same time, according to economists from Bank Pekau and ING Bank Slesky, interest rates will be cut at the Monetary Policy Board meeting in September 2023. By the end of this year it will decrease by 0.75-1 point. Percentage A decrease in interest rates may translate into a decrease in spending on servicing public debt.
– Interest rate cuts are justified, and they certainly will. Contract offers show that Within 9 months, interest rates will drop to around 5%. Boris said.
The 2024 budget stipulates that the average annual inflation will reach 6.6 percent. In its forecasts, Bank Pecao indicates that inflation may already be in this area at the end of this year.
– I think with such large swings in the inflation rate that we’ve been dealing with lately, it would be a positive phenomenon for it to be close to 5% next year. in the middleBecause it will stimulate consumption. Of course, I understand the mechanism that higher inflation means higher budget revenues, but this year has shown that this effect is not significant and that the rise in real income of society is more important, because it increases consumption and thus affects the increase in budget revenues. Head of PFR.
Powell reminded Boris that the implementation of the budget in recent years has been better than planned and that the deficit has turned out to be less than planned. He also noted that the Polish economy enjoys strong and stable fundamentals.
– Regarding public debt, we hold about 50 percent. GDP, the deficit is under control, and its increase is mainly due to increased spending on modernizing the army. We have a current account surplus and a stable zloty. Data published by the European Commission also shows that we are among the most stable EU countries. Only in inflation are we worse than the EU average Boris pointed out.
The 2024 budget stipulates that the GDP growth rate will be affected by the implementation of the National Reconstruction Program, although Poland has not yet received any money from this source. And despite this – as stated by the head of the political finance watchdog – “the KPO is being implemented”.
– Despite a lack of funding from the European Commission, the program is accelerating. We already have 36 reported investments, and sometimes several projects under one investment. So far we have paid about PLN 4 billion, and we assume that by the end of this year we will have paid a total of PLN 12 billion. First of all, we see that the whole process is greatly accelerated, because the institutions needed several months to conduct tenders and select contractors, and now it has reached the point where we see these investments take off – said Powell Boris.
The President of the PFR indicated where the funds allocated for the implementation of the Polish KPO go.
– We have paid a lot of money under the Maluch plus program, i.e. to invest in nurseries and children’s clubs, and we also have investments as part of a project for the robotization and digitization of companies. An interesting project is the development of vocational education – 100 vocational education centers will be created in Poland. Large sums of money went to the ministries of climate and infrastructure; The money for the Climate Ministry is for investing in renewables, while the money for infrastructure is for supporting railway investments – added.
As Powell Boris emphasized, it is already clear that this is so Investments – along with exports – are the driving force of the economy.
– Whether in the second quarter or in the previous months because their dynamic reaches 8%. Part of this increase is the effect of the KPO previously funded by us, and the other part is the result of the end of the EU perspective, but there is also The significant impact of BGK and its programme, for which PLN 40 billion has already been paid, can be seen at the local government level. In addition, companies are also increasing their investments. I believe that investments should continue in an upward trend, if only because a new perspective has been launched for the European UnionTo which there are no obvious threats, foreign investments are also high. So I think investments can still grow in the range of 9-10 percent. – summed up the head of the PFR.
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