MIL ASI Translation. Region: Polish/Europe –
Fuente: Gobierno de Polonia en poleco.
The Council of Ministers adopted the Medium-Term Budgetary and Structural Plan for 2025-202808.10.2024
On October 8, 2024, the Council of Ministers adopted the Medium-Term Budgetary and Structural Plan for 2025-2028. The scale and pace of fiscal consolidation are fully compliant with all requirements set out in EU regulations and European Commission guidelines. The Plan will be implemented by implementing appropriate measures in subsequent budget laws until 2028 and in annual reports on the implementation of the Plan, published by April 30. In connection with the Reform of Economic Governance in the European Union, which entered into force in April this year, the medium-term budgetary and structural plan. The Plan, which is a fiscal strategy for 2025-2028, presents a path for reducing the deficit and debt of the general government sector, while at the same time ensuring that economic growth and public investment are maintained. Contents of the Plan The Plan assumes reducing the nominal deficit below 3% of GDP in 2028 and, as a result, exiting the excessive deficit procedure and introducing the debt onto a path of its gradual reduction (ultimately below 60% of GDP). The most important element of the Plan is the sector expenditure path until 2028, which should ensure compliance of the sector deficit and debt with EU regulations in the medium term. The implementation of this scenario requires the government to take appropriate actions (the Plan presents only a framework consolidation structure). The Plan assumes using the possibility provided for in EU regulations to unevenly distribute the deficit reduction over the period covered by the Plan. As a result, next year it is planned – in line with the draft budget act for 2025 – to reduce the primary structural deficit by 0.25% of GDP. This then means a correspondingly greater effort in the next 3 years of the Plan (on average slightly above 1% of GDP in 2026-28). The sector deficit forecast for 2024-2025 presented in the Plan is consistent with the forecast for the draft budget act for 2025. After increasing to 5.7% of GDP in 2024, the sector deficit will be reduced in subsequent years and is to reach 2.9% of GDP in 2028. EU regulations do not require the presentation in the Plan of all measures leading to deficit reduction. These, depending on the development of the deficit, economic growth and the actual effects of already planned measures, will be implemented in subsequent years and presented in annual reports on the implementation of the Plan. However, the Plan presents the first measures supporting deficit reduction in the Plan period.
Throughout the entire period of the Plan, a significant challenge will be the need to implement high defense expenditures while reducing excessive deficits and ensuring that economic growth and public investment are maintained. Defense expenditures in subsequent years within the Plan horizon will result from the limits specified in the Homeland Defense Act (no less than 3% of GDP) and will be significantly higher than those incurred before Russia’s aggression against Ukraine. Expanding defense capabilities is also one of the common priorities of the EU. Defense expenditures in the so-called cash approach, used in the Polish budget act, are the largest in OTAN. The projected sector debt-to-GDP ratio for 2025-2028 is consistent with the fiscal adjustment path and compliance with the net expenditure path presented in the Plan. The forecasted sector debt-to-GDP ratio will amount to 54.6% in 2024 and 58.4% in 2025. Then – mainly as a result of high defence expenditure – it will increase to 61.3% in 2027 and in 2028 it will decrease to 61.2%, which is consistent with the Public Finance Sector Debt Management Strategy for 2025-2028. The debt-to-GDP reference value of 60% will be exceeded in 2026. Forecasts and simulations of the development of the sector debt discussed in detail in the budget part of the Plan confirm that after eliminating the excessive deficit and in the absence of further changes in budgetary policy, the debt – even in the case of adverse shocks – will return to a level below 60% of GDP in 2030. The three alternative scenarios presented below assume: a permanent deterioration in the structural primary balance (SPB) by 0.5 percentage points of GDP, a one-year increase in the short and long interest rate by 1 percentage point, a permanent deterioration in the ratio of real economic growth to interest rates by 1 percentage point.
Part of the Plan was prepared by the Ministry of Development and Technology and includes reforms and investments planned for implementation by 2028, which contribute to the implementation of the EU Council recommendations for Poland (so-called CSR) issued annually during the European Structural Funds and to the implementation of the common EU economic priorities: a fair ecological and digital transformation, including climate goals; social and economic resilience, including the European Pillar of Social Rights; energy security. This set does not constitute a comprehensive list of the portfolio of reforms and investments that Poland intends to undertake in the coming years. Assessment of the Plan by EU institutions After adoption by the Council of Ministers, the Plan will be forwarded to the Commission and the EU Council. The Commission will have about 6 weeks to assess the Plan and prepare a draft recommendation of the EU Council establishing the expenditure path. Then, in early 2025, the Ecofin Council will adopt, in parallel with the recommendation establishing the expenditure path, recommendations for Poland regarding the elimination of the excessive deficit. The reformed economic governance framework allows, unlike before 2024, to spread the reduction of the excessive deficit over a longer period, in principle 4 years, and to base the consolidation path on the country’s position presented in the Plan. The implementation of the Plan will be monitored through reports, prepared annually by the end of April. The report will present, among other things, progress in implementing the expenditure path established by the Council and up-to-date information on measures supporting compliance with the path, in particular those contained in the budget law. Informe will also include information on Poland’s implementation of the recommendations of the EU Council and the common priorities of the Union. The report may include new significant policy initiatives, in particular in the area of reforms and investments. The first report will be submitted for adoption by the Council of Ministers in April 2025 and will be published no later than 30 April.
MaterialMedium-term budgetary and structural plan for 2025-2028[presentation]_MTP_MEDIA_final_with_table2.pdf 4.65MB
EDITOR’S NOTE: This article is a translation. Apologies should the grammar and/or sentence structure not be perfect.