“The budget doesn’t have much control over the government. Then again, the government does not have much control over the budget.” The words of American satirist P. J. O’Rourke which, while apparently true of the United States are, thankfully thus far, less true of Poland, where a tighter ship is run. On Monday evening the president signed into law the budget for 2018, according to his chief of staff, Krzysztof Szczerski.
The budget sets government spending at PLN 397.2 billion and forecasts revenues of PLN 355.7 billion. The deficit is planned to be PLN 41.5 billion which equates to 2.7 per cent of GDP, below the EU ceiling of 3 per cent of GDP. The budget assumes that the economy will grow by 3.8 per cent in 2018. In the Sejm, Poland’s lower house of parliament, in the vote on the budget 240 deputies voted for, 189 against with two abstentions.
On current performance, the budget forecasts appear reasonable. Speaking at last week’s World Economic Forum in Davos, the prime minister. Mateusz Morawiecki said that 2018 will be great for the Polish and global economies. According to him, the growth in Poland’s GDP in the final quarter of 2017 “may be close to five per cent” and 4.5 per cent for the year as whole. “Our business model works” he said. Not only was Poland not selling off assets or draining companies of dividends but Poland’s crackdown on tax fraud was “inspiring awe in Davos”.
Self-praise is no recommendation, of course, but the current performance is certainly good and perhaps helps to account for PiS’s strong performance in opinion polls. The latest, by Estymator, suggests that the governing party would receive 48.7 per cent in an election, three percentage points up from the last survey by the same pollster. In contrast, opposition PO is down 2.8 percentage points at 20.6 per cent, with Kukiz 15 on 9.4 per cent and the SLD on 6.8 per cent, and the largely rural PSL on 5.2 per cent.
Despite this, Morawiecki did recognize that modernization and innovation were the greatest challenges facing Poland. He said that there was much interest in Poland at the forum, which, with robust economic growth and a stable economy, is an attractive destination for investors according to the head of the National Bank of Poland, Adam Glapiński, who was also at the forum. Speaking to Polish Radio, he described Poland as one of the “hottest” places for investment internationally with investors liking the stability of the Polish democracy and the currency.
Speaking of the currency, Glapiński echoed the prime minister’s view that Poland could only join the Euro once the gap in incomes with western European countries had closed, saying that the central bank’s own analysis had concluded that “such a step should not be rushed.” Even were Poland to meet all the criteria for membership, whether adopting the Euro would be beneficial for the country would have to be considered and, in his view, there was no such need. Some businesses would benefit, but the majority of the population would suffer financially he said. Also at Davos, President Duda said that Poland could consider replacing the zloty with the euro only after earnings in the country approached the European Union average. On this point at least, they are all agreed, as are 47 per cent of Poles who believe adopting the Euro would be bad as against 14 per cent who say it would be good.
Be that as it may, back home on Friday the Sejm voted in favour of a package of measures collectively referred to as a “constitution for business” which aims to simplify procedures for those setting up and running their own businesses. The new rules include a presumption of entrepreneurial honesty and the principle of a friendly interpretation of regulations whereby any doubt will be resolved in favour of the entrepreneur. The general rule in business will be that “everything which is not forbidden is allowed.”
The package is designed to allow small entrepreneurs to run a business without the need to register it if their monthly income is less than half the national minimum wage. This measure could benefit about 75,000 people, including those who provide services such as private tutoring, according the government and is also aimed at reducing the unregistered, tax-evading segment of the economy where undeclared cash payments are common. New businesses will be given special start-up incentives by being exempted from paying social security contributions for the first six months, followed by two years of the “small social insurance” programme. This is certainly to be welcomed.
Thus, it seems that whatever other failings of which the government may be accused, on the economy rationality prevails.