CEE Finance Minister of the Year

Poland’s low level of debt at the start of the crisis gave it room to take strong action to look after its economy

The coronavirus pandemic has affected Poland in a similar fashion to most European countries — by increasing budgets and spending and denting economic growth.

Recessions in major trading partners are, of course, harmful to the Polish economy. However, through its diversification and the finance ministry’s swift implementation of aggressive economic stimulus measures alongside robust social care policies, Poland looks likely to be among the least severely affected economies in the EU.

Tadeusz Kościński, Poland’s minister of finance, says: “Our fiscal package had five pillars. The primary one was to ensure sufficient funding for the health service. Second, we needed to look after employees to reduce job losses, and this pillar included packages such as a care allowance for parents who were facing a dilemma when schools shut down. An additional package bought a bridge over the lockdown period for companies, ensuring they continued to have liquidity.”

The Z100bn ($26.2bn) financial shield to prevent unemployment has been widely praised as a swift and effective response to the crisis, particularly on top of the Z212bn anti-crisis shield economic support package.

“In terms of the financial system, we did everything we possibly could do to ensure it was sufficiently liquid, such as reducing interest rates and obligatory reserve ratios. The final pillar was public investment, to enable us to invest very quickly once lockdown was lifted,” Kościński adds.

The ministry has worked a fine balance between focusing on strong consumption levels and supporting macro growth, using EU funding to obtain public investment and therefore to secure private investment.

“Our strategy is to emerge from the recession with strong domestic private consumption, which is why we have no plans to increase taxes, or cut costs — apart from certain unnecessary costs. The intention is to continue with the social programmes in Poland, such as pension payments and child benefit schemes. A lot of money is going into people’s pockets to keep them spending,” Kościński says.

The response to the crisis was exemplary, but was made possible thanks to Poland’s low indebtedness at the start of the crisis, which ensured the government had the fiscal room to take such definitive action.

“Poland has had a strong response, and its debt may increase by up to 10% of GDP,” says Marek Drimal, EMEA strategist at Société Générale. “But as long as there is a justification for that, it is perfectly fine.”