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Wednesday, September 22, 2021

Polish GDP. How will the economy develop? Government forecasts in the draft budget for 2022

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In the justification to the draft budget for 2022, it was written that the real GDP growth rate in 2023 will reach 3.7 percent, and in the years 2024-2025 it will be 3.5 percent – it was written in the justification to the draft budget for 2022. As indicated, this forecast does not take into account the implementation of the National Reconstruction Plan.

“(…) the real GDP growth rate is expected to reach 3.7% in 2023 and 3.5% in 2024-2025. The forecast for 2023 is lower than the available consensus (…), which as in the case of the forecast for 2022, it is, among others, the effect of not taking into account the implementation of the KPO in the forecast “- it was written in the explanatory memorandum to the draft budget for 2022, published on the website of the Ministry of Finance.

Budget project – justification

The justification shows that the Ministry of Finance expects that the interest rate hike cycle started next year will end in 2023.

“Assuming the absence of new, serious disturbances in the economy and in the face of increased inflationary pressure, it is expected that in the years 2023-2025 the monetary policy of the NBP will be aimed at achieving the inflation target of 2.5%. At the beginning of this period, core inflation may still remain at a heightened level. due to the delayed effects of the increase in demand in 2022 (including the effect of the implementation of the Polish Deal program) In the coming years, inter alia, as a result of delayed higher NBP interest rates, inflation should decline. that the growth rate of consumer prices will reach the NBP’s inflation target at the end of the forecast horizon, “it was written in the explanatory memorandum to the draft budget.

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Apart from the rate hikes, the Ministry of Finance assumes the withdrawal of support from the fiscal policy due to the “return to the expenditure path determined by domestic and EU fiscal rules”. As a result, the growth rate of domestic demand, which is high in the years 2021-2022, will decline in the coming years. The dynamics of private consumption will also decrease, which will be the result of “a decrease in the real dynamics of gross disposable income of households to about 3% and a lower level of accumulated savings”.

Budget project – forecasts

As stated in the justification, the labor market is to stabilize in the years 2023-2025. Average employment in the national economy will increase by 0.3% in 2023, and will remain stable in the following years. Taking this into account and the changes in labor supply resulting from, inter alia, due to the reduction of the tax wedge resulting from the Polish Order, the registered unemployment rate at the end of 2025 will amount to 4%. The average salary is to grow at a pace similar to that of labor productivity.

“In 2023, the growth rate of demand reported by the general government sector (GG sector) will clearly decline, both in terms of public consumption and investments. GG investment in 2023 would be significantly higher.) It is forecasted that in the years 2023-2025 the level of general government investment will remain at the average level of approximately 4.3% of GDP, i.e. significantly above the EU average for the last 10 years “- it was written in the explanatory memorandum.

At the same time, the Ministry of Finance expects that due to the disbursement of funds from the new EU financial perspective, the dynamics of public demand should gradually increase.

“Following the improvement in the investment dynamics of the general government sector, the investment dynamics in the entire economy will also improve, supported throughout the forecast period by a stable growth of private investment (i.e. outside the general government sector). In particular, the level of investment in the general government sector will be shaped by multi-annual government programs, in particular in the area of ​​road and rail infrastructure. An important instrument to stimulate public investments will also be the Government Fund Polish Order: Strategic Investments Program “- indicated in the justification.

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GDP growth

According to the Ministry of Finance, the high rate of GDP growth in the European Union will continue this and next year, and then it will decline. This will translate into a decline in the growth rate of exports, which will stabilize at the level of approx. 60%. GDP.

“The gradual decline in the growth rate of domestic demand and exports will result in lower and lower import dynamics, although it will remain slightly above the export dynamics. As a result, net exports, which in 2023 will temporarily record a positive contribution to GDP growth, will have a positive contribution to GDP growth in the next two years. neutral impact on economic growth. The current account balance should also gradually move towards a balanced state, reaching 0.1% of GDP in 2025. ” – indicated in the justification to the draft budget act for 2022.

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