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Polish public finance deficit below 1% of GDP

Poland’s public finance deficit may hit an all-time low, exceeding even the government’s generous expectations. Ignacy Morawski of SpotData.pl explains where this positive development in public finances comes from.

editor: REMIX NEWS

The average public finance deficit for the last four quarters (third quarter 2017 to the second quarter of 2018) amounted to only 0.7 percent of Poland’s GDP. This is the first time when this measure has fallen below 1 percent of GDP.

Therefore, the deficit for the entire year may also fall below the same percentage. What’s more, the Ministry of Finance is suggesting that the deficit may reach below 0.5 percent. For comparison, the government’s longstanding financial plan foresaw a deficit at 2.1 percent of GDP.

The income tax and social insurance contributions are rising rapidly. This is a key factor

The main financial hero of the previous years, the collectability of VAT, has had minor impact in correcting the balance of public finances. The income from the tax has stopped increasing (although this is data from before the so-called split payment.)

Meanwhile, the state’s revenue connected to salaries and profits of companies – the income tax and social insurance contributions are rising rapidly. This is a key factor, which has corrected the state’s budget in the previous year. This is influenced by the quick increase in salaries and employment, as well as the mass registration of migrants in the Social Insurance Institution (ZUS) – 150,000 people over the course of a year.