International Monetary Fund Says Polish Economy Will Remain Strong

International Monetary Fund experts in their annual report on the economic situation and outlook for the Republic of Poland declare that the economy of the country is “operating above potential” and remain positive about its GDP growth in the near future. They also note that the official unemployment rate is record low and the economy is reaping the benefits of hefty funding from the EU.

The authors of the report point out that the current economic situation has its roots partly in the economic revival present in Germany and other European states. The general budget deficit remains below its limit. Fiscal performance has been described as “very encouraging”. The monetary policy, exercised by the Monetary Policy Council, in the eyes of the International Monetary Fund, is “appropriate for now” but the price index needs to be closely monitored and appropriate measures taken if prices grow above the assumed inflation target (currently 2.5%). Even though recently there has been a sharp increase in inflation figures, the Council remains dovish about increasing official interest rates.

Even though the International Monetary Fund projects that Poland’s GDP growth will be around 3 percent in the upcoming two years, in the time that follows the economy will start to cool off. GDP growth figures for 2020-2022 show the growth will fall to between 2 and three percent, accompanied by slower consumption growth and domestic demand. On the other hand, the predicted unemployment figures look very promising. Unemployment will drop even more, stopping at 4.2 percent.

The big question is how will Polish economy cope with the lowering of the retirement age which comes into effect later this year. International Monetary Fund Executive Directors call for structural reforms, particularly for eliminating preferential VAT, cutting down on government spending and pension system reforms. The time for that is good considering the present economic environment. Experts highlight the need to cut the state deficit as well.