Poland Doubles 2014 Budget-Deficit Forecast on Slowdown

Poland more than doubled its 2014 budget-deficit forecast as the slowdown in the European Union’s largest eastern economy curbs revenue, the nation’s updated EU convergence report showed.

The shortfall will amount to 3.3 percent of gross domestic product, compared with 1.6 percent forecast in last year’s report, according to the Finance Ministry document obtained by Bloomberg News. The government also cut its economic-growth projection for next year to 2.5 percent from 3.2 percent.

Poland’s economy expanded at the slowest pace since 2009 last year as the euro-area debt crisis sapped demand from its main trading partners and consumer spending stalled amid rising unemployment. The convergence program, which presents plans to narrow the deficit in line with European Union requirements, is due to be discussed at a Cabinet meeting in Warsaw tomorrow.

“Slower-than-forecast economic growth has contributed to a significant worsening in cyclical conditions for the management of macroeconomic policy,” according to the document. “Public- finance consolidation” must be “coupled with balanced economic growth” as the debt crisis deepens “in some of the euro-area members.”

Poland is planning additional budget-cutting measures after its deficit narrowed to 3.9 percent last year, less than planned, Finance Minister Jacek Rostowski said last week. The government will seek to narrow the gap to 3.5 percent this year as economic growth slows further to 1.5 percent, he said.

EU member states have to keep their deficits under 3 percent or else present a plan to do so. Offenders may lose access to development funds. The European Commission, the EU’s executive, has granted Poland leeway of about 0.5 percentage point on its targets to account for the cost of a pension overhaul.

The updated program assumes that the pace of expansion will pick up to 3.8 percent in 2015, helping the deficit decline to 2.7 percent. Public debt will rise to 55.8 percent of economic output this year before it falling to 55.7 percent in 2014, according to the document.

To contact the reporter on this story: Piotr Skolimowski in Warsaw at pskolimowski@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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