2018 GDP growth will be 3.8%, says the government

As the first half of 2017 is slowly drawing to an end, it is time to start making some plans with respect to 2018. Work on next year’s budget act has already started. The Government Information Centre announced that Polish government has approved of the budget assumptions that will constitute the foundation for constructing the most important piece of legislation for public finances in the country.

The Ministry of Finance predicts that Polish economy in the twelve months of 2018 will be growing at the rate of 3.8%. According to the recent data published by Central Statistical Institution (GUS), the GDP figure for the first quarter of 2017 was 4.0%, while in the entire 2016 the economy was growing at the rate of 2.8%. Meanwhile, OECD experts predict Polish economic growth in 2017 will be 3.6%. All in all, Polish economy is in good shape, and it seems that next year it will continue developing at a stable pace.

Other macroeconomic indicators are also looking good. Inflation rate projected to be 2.3% (currently it’s 2.0% y/y), which is close to the 2.5% continuous inflation target pursued by the National Bank of Poland. Higher prices will translate into higher budget revenue from value added tax. Wages and employment figures are also projected to grow. The government has already announced that they want to increase the minimum monthly salary by 80 PLN. Average remuneration is expected to go up by 200 PLN, while the unemployment rate will most likely continue moving downwards until reaching 6.4%. This will lead to increased consumer spending.

Polish Minister of Finance, Mateusz Morawiecki, stated that the budget assumptions are neither overly positive, nor overly conservative. One of the biggest challenges the government is facing is the upcoming lowering of the retirement age. An increase in the size of the population of pensioners will mean higher budget expenditure. If the government is wrong about their projections as to how many people will decide to continue working despite reaching the pension age, this may put a strain on the state finances.