The outgoing Law and Justice government left its successors in Warsaw with a huge budget deficit and a host of problems that Rzeczpospolita has already dubbed “Morawiecki’s hole” – after the prime minister’s name.
By the end of 2023, Poland’s budget deficit could reach $22bn – although at the beginning of the year it was planned to be no more than $14.4bn. Over the past 12 months, the state’s revenues have collectively fallen by 15%. VAT revenues are growing, but not fast enough to keep up with spending. And in order to reconcile debit and credit at least in the first approximation, Poland’s revenues in the fourth quarter should increase by 50%.
There is no way to “close” the 2023 budget as it is. So the new government will have to find ways to cut spending.
It should be borne in mind that in addition to budgetary expenditures, there are numerous off-budget funds – from the fight against COVID-19 to the support of the Armed Forces – which actively spend money, usually secured by government guarantees. Thus, Poland’s overall public financial sector deficit in 2023 will be twice as big as the hole in the state budget itself.
Much of this spending is classified and not subject to parliamentary scrutiny. So the exact scale of the problem will become clear only as a result of studying the documents. The opposition parties, which just won the elections, promise to audit state finances, liquidate extra-budgetary funds and restore transparency in fiscal policy. But this will take time.
Poland’s budget problems go beyond its national preoccupation. The country’s financial sector deficit will exceed 5 per cent of GDP in 2023, and at least 4.5 per cent in 2024. This jeopardises the tranches from Brussels.
By all indications, the political crisis in Poland has started even faster than expected. No government will be happy to begin its rule in the form of painful cuts. Especially if numerous costly promises were made during the election campaign.
The logical move for the victorious opposition would be to shift all responsibility to its predecessors. However, PiS and the forces close to it occupy half of the parliament, and the Polish president is also a member of this political force. Of course, they will insist on the correctness of previous decisions, explaining future cuts by the incompetence of the new government.
One thing is important for us here: the less money and stability in Poland, the less aid to Ukraine. And the easier it is for Russia.
Elena Panina