Next year’s budget deals away with danger of growing public debt. The government presented in the Sejm on Thursday, its draft of the 2005 budget law, which according to the ministers, introduces significant fiscal reforms that deal away with the danger of growing public debt-to-GDP ratio. In the opinion of deputy PM Jerzy Hausner, keeping the public debt in reins is one of the most important tests for the government next year, along with sustaining economic growth of over 5%, growth of investment outlays of more than 12%, and a drop of the number of unemployed by at least 400,000.
However, finance minister Miroslaw Gronicki said there is no possibility to stop the growth of public debt next year, but the government will attempt to curb the growth rate. Gronicki and Hausner agree that in 2004, the public debt-to-GDP ratio will certainly not exceed the secondary warning threshold of 55%, amounting to about 52.0%, or close to the 51.6% level reported for 2003. Gronicki reminded that the medium-term strategy for public debt assumed stabilisation of the debt in 2006 at the 2005 level, and its decline in the subsequent years. The public debt in relation to GDP, calculated according to the EU methodology ESA 95, will be at 48.2% of GDP in 2005, 48.3% in 2006, while as of 2007, it will start falling, to 47.7%. In early September, the Central Statistical Office (GUS) reported that the ESA 95-calculated public debt amounted to 45.4% of Poland’s GDP in 2003 and was likely to rise to 47.0% this year.
Gronicki said that the 2005 budget draft assumed economic growth at 5%, which should not be dangerous for the economic stability. He added, however, that the government assumed the domestic demand to grow at about the same rate as GDP, but contribution of investments in the GDP growth will be higher, while that of individual consumption should be lower. The 2005 budget draft assumes improvement on the labour market as average employment in the enterprise sector should grow by 1.0%. The number of unemployed should decrease to about 2.87mn, and the jobless rate would fall to about 18.2%.
Revenues of the state are expected at PLN 173.7bn, or 11.3% higher than the expected execution this year. They will grow without increased tax burden, the finance minister added. Expenditures will grow (nominally) by 4.4%, to PLN 208.7bn, but some of this growth accounts for liquidation of special resources (not included in the budget) and replacing it with target funds, which will be included in the budget. “The real growth will be by 1.4%. With the economic growth at 5.0% this means relative decrease of the state expenditures in GDP,” Gronicki pointed out. The budget draft also assumes
cutting the share of fixed expenditures to 58.8% in 2005, down from over 65% in 2001-2002. FinMin concluded that the 2005 budget draft is not excessively expansive – as it does not incite domestic demand too much, but it is not too restrictive either – as it does not cause a decrease in the domestic demand growth.