The Monetary Policy Council published its opinion on the draft budget act for 2024. The MPC indicated that the issue of extending the so-called anti-inflation shield may be an important factor in fiscal policy.
The Council assessed that “a significant source of uncertainty in fiscal policy in 2024 is the issue of extending protective measures protecting economic entities against the effects of high increases in energy and food prices, i.e. the so-called anti-inflation shield“. It is written that “from the provisions contained in the draft act and the justification it can be concluded that this draft assumes the termination of the functioning of the main solutions constituting the anti-inflation shield by the end of 2023.”
MPC on the budget act for 2024
It was indicated that the expiration of the protective measures would contribute to improving the result of the public finance sector in 2024. Moreover – as we read in the Monetary Policy Council’s assessment – a factor that will contribute to reducing the sector deficit is the expiration of the deficit observed this year. the effect of high returns as part of the annual settlement for 2022. “According to NBP estimates, in total this will contribute to an increase in the sector’s income in 2024 in relation to GDP by at least 0.6 percentage points of GDP,” it was written.
However, changes in the sector’s expenditure will contribute to a higher sector deficit in 2024 social benefits. According to NBP estimates, the ratio of these expenses to GDP will increase by 1.0 points next year. percent GDP, and their “main cause will be an increase in the amount of the childcare benefit from PLN 500 to PLN 800, which will increase the above-mentioned relationship by approximately 0.6 percentage points of GDP” – it was indicated. Moreover – as noted – in conditions of forecast disinflation, the indexation index pensions and pensions in 2024 will be higher than expected inflationas well as on the expected growth of nominal GDP.
The category of public expenditure that will contribute to a higher sector deficit is also: employment costs. According to the National Bank of Poland, the amount of expenditure on remuneration in the state budget planned in the draft law is 13.4% lower. higher than in the Budget Act for 2023 after the amendment.
According to the estimates included in the Public Finance Sector Debt Management Strategy in 2024-2027, the ratio of the state public debt (PDP) to GDP is expected to decrease at the end of 2023 compared to the previous year from 39.4%. to 37.9 percent
In turn, the debt ratio of the public finance sector in ESA2010 terms is to remain at the same level as at the end of 2022 (49.3%), which will be the result of the relatively high rate of nominal GDP growth and the deterioration of the public finance sector result (by 1. 9 percentage points of GDP) and the planned increase in the debt of the Armed Forces Support Fund (1.0 percentage points of GDP).
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