16 November 2012

IMF: Poland—Concluding statement of the 2012 staff visit

After robust growth last year, the Polish economy is feeling the effects of headwinds from Europe. Growth is moderating amid weaker export demand and confidence effects on private investment and consumption, which have combined with lower public investment. Economic activity is projected to slow further. Rising unemployment and tight credit availability are expected to weigh further on household spending. Public investment will continue to decline and private investment is expected to rebound only when uncertainty about external and domestic prospects dissipates. Overall, GDP growth is projected to slow from about 2¼ per cent in 2012 to 1¾ per cent in 2013. Risks around this outlook are on the downside, as a deeper or more protracted slowdown in Europe or a re-intensification of the crisis would affect Poland through substantial trade and financial channels.

The impressive fiscal consolidation has continued, and the draft 2013 budget balances further fiscal adjustment and support for the economy. Despite weaker-than-expected VAT revenues, the general government deficit is projected to drop by 1½ percentage points to about 3½ per cent of GDP in 2012. The 2013 budget rightly continues the structural consolidation (with measures of some ½ per cent of GDP) while allowing automatic stabilisers to mitigate the slowdown. These consolidation efforts have supported market confidence and contributed to very favourable financing conditions. The authorities’ plans to boost infrastructure investment and SME lending could help protect needed investment and spur economic activity. At the same time, it will be important to ensure that public resources are used efficiently, and that the programme is implemented in a transparent manner, under appropriate governance and accountability mechanisms.

Over the medium term, reducing the ratio of public debt to GDP remains a key priority. In this regard, the IMF welcomes the authorities’ intention to put in place a permanent expenditure rule that will help anchor public finances. This, alongside additional consolidation measures of about 1 per cent of GDP over the next few years, should enable Poland to reach its medium-term objective (a 1 per cent of GDP structural fiscal deficit) and put the public debt ratio firmly on a downward path. Improving the multi-year fiscal framework would complement these steps by strengthening expenditure planning. Further reforms to the pension system should continue, particularly with respect to special occupational pension schemes.

Regulatory and supervisory efforts have helped improve the resilience of the banking system, but the economic slowdown will pose some challenges for banks. Bank capital buffers have remained comfortable and overall liquidity is ample. However, as the economy has slowed, NPLs have increased and credit growth has eased. IMF continues to favour a more proactive approach to addressing NPLs—including through voluntary out-of-court restructuring by banks, which should be transparently reported and subject to strict prudential rules and supervisory scrutiny—as this would help ensure that credit and growth prospects are not undermined. IMF welcomes progress in establishing a Systemic Risk Board to implement a macro-prudential framework and the upgrading of the bank resolution toolkit. An in-depth financial stability assessment and a review of these issues will be part of the forthcoming Financial Sector Assessment Programme (FSAP) update, planned for the first half of 2013.

Press release

© International Monetary Fund