Republic of Poland: 2018 Article IV Consultation—Press Release; Staff Report; and Statement by the Alternate Executive Director for the Republic of Poland

International Monetary Fund. European Dept.

doi:10.5089/9781484397503.002.A001

Author: International Monetary Fund. European Dept.

Publication Date:: 06 Feb 2019

eISBN:: 9781484397503

Language:: English

Keywords:: ISCR; CR; cost; freeze; GDP; authority; IMF staff calculation; banking sector; headline inflation; central bank; financial asset; Inflation; Wages; Pensions; Global

Download PDF (1.3 MB)

2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Alternate Executive Director for the Republic of Poland

Abstract

2018 Article IV Consultation-Press Release; Staff Report; and Statement by the Alternate Executive Director for the Republic of Poland

Context

1. Poland has continued to enjoy strong and inclusive growth. The economy has experienced one of the longest stretches of continuous expansion in the world, which has been ongoing for 25 years. Moreover, Poland was the only European Union (EU) member to avoid a recession during the Global Financial Crisis (GFC), and its subsequent growth rebound has been among the most rapid. These trends helped to sharply reduce unemployment to a low level and boost PPP-based per capita income to 70 percent of the EU average. Strong growth coupled with redistribution policies helped improve social welfare, with Poland comparing favorably to EU peers in terms of the incidence of poverty and income inequality. These impressive economic and social achievements are the dividends of earlier institutional and governance reforms and sustained prudent management of the macro-economy, and which have made Poland an attractive destination for foreign investment.

2. Nonetheless, further reform efforts are needed to ensure continued robust growth. Poland is at an advanced stage of demographic transition, with the working-age population already shrinking and forecast to decline at an annual rate of over 1 percent through the middle of the century—among the fastest in the world. In addition, the possible opening of labor markets in neighboring countries to non-EU workers could make Poland less attractive as a destination for foreign workers. As a result, the current labor-intensive growth model will become increasingly difficult to sustain and should be replaced with one focused on boosting productivity and moving further up the value chain. Moreover, adhering to prudent principles of economic governance and avoiding sustained reliance on policy stimulus are essential to keep macroeconomic imbalances in check and to maintain resilience in the face of adverse shocks.

Recent Developments

3. Following several years of very strong growth, Poland’s economic cycle likely peaked in late 2018. Since 2017, growth has benefitted from three coincident cycles—a rebound in euro-area activity, a substantial increase in EU transfers, and new large social benefit programs. As a result, GDP growth accelerated from 3.1 percent (year-on-year) in 2016 to more than 5 percent during the first three quarters of 2018. Private consumption has been buoyed by strong growth in earned incomes, generous new child benefits, expanding consumer credit and a surge in foreign workers that also raised the number of consumers. Investment by local governments and state-owned enterprises (SOEs) has been boosted by EU capital transfers of about 2 percentage points of GDP during 2017–18.¹ Private investment has remained lackluster. The contribution from the external sector has turned marginally negative as rising imports on account of robust domestic demand has outpaced the increase in exports. Recent high-frequency indicators suggest that growth may have moderated in late-2018 amid a drop in external demand—especially in the automotive sector.

4. After rising from very-low levels, inflation has stabilized below the mid-point of the target during the past year, despite rapid GDP growth and a tight labor market. Headline inflation has hovered between 1.3–2.5 percent (year-on-year) since early 2017, but was generally below the mid-point of the target (2.5 percent). It dropped further to 1.3 percent in November 2018. Core inflation has remained low at just-under 1 percent, and fell to 0.7 percent in November 2018. The recovery from overall deflation in recent years has been accompanied by a growing share of the core consumer price basket (by weight) with inflation exceeding the lower bound of the target (1.5 percent). Nonetheless, about half of the core consumer price basket remains firmly in very-low inflation or even deflation territory, and the share in deep deflation has risen in 2018, thereby dampening the pickup in overall inflation. Inflation persistently below the mid¬point of the target reflects a combination of: (i) participation in regional supply chains, which restrains domestic costs and prices in the tradable sectors; (ii) large price declines across several categories, most notably for financial services in February 2018;² (iii) some dampening of wage growth from the influx of foreign workers, the estimated stock of which has risen from 1 percent of employment in 2014 to around 5 percent in 2017 (Box 1);³ and (iv) strong price competition from “big-box” retailers and e-commerce sites. Nonetheless, capacity utilization rates are high, and unemployment is 3.8 percent, near its record low, suggesting the economy is operating just-above potential, with the output gap estimated at around 0.5 percent in 2018.⁴

5. The external current account deficit has narrowed considerably in recent years. The current account balance has risen by 6½ percentage points of GDP since the pre-GFC low in 2007–08, reaching a modest surplus in 2017, underpinned by rising corporate net saving—amid low investment—while the government and household sectors have remained net dissavers. In 2018, the current account is estimated to have returned to a deficit (around ¾ percent of GDP). Poland’s negative net international investment position—largely reflecting FDI (including intercompany loans)—moderated to an estimated 58 percent of GDP in Q3:2018. With the exchange rate serving as a shock absorber, the real effective exchange rate has tended to fluctuate, but its level is broadly unchanged from the mid-2000s. Poland’s external sector position in 2018 is assessed to have been broadly in line with medium-term fundamentals and desirable policies (Annex VIII). At about 100 percent of the Fund’s reserve adequacy metric, the level of reserves is broadly adequate to guard against external shocks and disorderly market conditions.⁵

6. Credit growth remains moderate and the banking sector is sound. Indebtedness of corporates and households is relatively low from a cross-country perspective. Credit continues to grow more slowly than nominal GDP, but its composition is skewed toward unsecured consumer credit, with an NPL ratio of 10.9 percent (against a system-average of 7.3 percent). Zloty-denominated mortgage growth has slowed on the step-wise decrease in the loan-to-value ceiling during 2014–17, but growth remains around 11 percent.⁶ Current strong housing demand is financed to a greater extent than before the GFC with buyers’ own resources. Rising construction costs have slowed the supply of new housing, and nominal house prices in some regions have risen to pre-GFC levels. Nonetheless, affordability remains comfortable owing to strong growth of household incomes. While bank lending to the corporate sector is subdued, leasing activity—often provided by bank affiliates—is large and expanding rapidly, and is heavily utilized by SMEs, which dominate the corporate sector. Banks are well-capitalized, liquid, mostly deposit-funded and the NPL ratio continues to edge down.⁷ Profitability has recovered somewhat from a dip in early 2016 following the introduction of the financial institutions asset tax (FIAT). Profitability of Polish banks compares favorably with systems in other European countries. Following the sale of part of a large foreign bank to state-controlled entities in 2017, about half of banking assets are domestically controlled—predominantly by the state (Annex III).

7. Solid economic fundamentals shielded Poland from the financial turbulence that beset several major emerging markets (EMs) during the first half of 2018. Adherence to EU policy frameworks as well as reductions in fiscal and external vulnerabilities—including in the context of the IMF’s Flexible Credit Line (terminated in late 2017)—kept Poland less-affected relative to other EMs during the recent sell-off than during the 2013 taper tantrum (Annex IV). However, foreign holdings of zloty-denominated government bonds have gradually declined as the interest rate differential with US dollar-denominated assets has narrowed. Moreover, there is little evidence that investors have been perturbed by Poland’s ongoing disputes with the EU (including on the rule of law) or with the government’s platform of “re-Polonization” and increased state ownership of key sectors. While spreads on sovereign bonds have widened relative to lows in 2015, they have been stable in recent years and new FDI continues to flow in. Reflecting solid macroeconomic fundamentals, credit rating agencies have maintained or raised their strong ratings for Poland.

Report on the Discussions

A. Outlook and Risks

8. GDP growth is expected to moderate to a more sustainable pace on softening external demand and tighter supply bottlenecks. Slowing external demand is projected to lower GDP growth to a still-strong 3.6 percent in 2019, underpinned by buoyant private consumption and absorption of EU funds (including carry-over of unspent amounts from 2018). At the same time, new foreign worker arrivals are expected to slow amid decelerating growth and the partial opening of labor markets in higher-income EU countries. Over the longer term, a shrinking working-age population, subdued private investment and tepid productivity gains are projected to gradually moderate GDP growth to around 2¾ percent by 2023. The current account deficit is forecast to widen gradually to around 1½ percent of GDP on declining household net saving (rather than a more-desirable increase in corporate investment).

9. Risks to the outlook are two-sided in the near term, although they are tilted down in the longer run. Faster absorption of EU funds could provide additional demand stimulus and raise near-term growth relative to the forecast, although the effect would be limited owing to supply bottlenecks. Downside risks could arise if global trade tensions were to escalate further or in the event of a disruptive Brexit, or if turbulence in global financial markets were to resume. Also, Poland could face more severe labor shortages if foreign workers were to leave in response to more attractive opportunities in other countries. On the domestic front, a larger footprint of the state in the economy could slow productivity growth, while investors’ risk appetite could be dented in the event of slippages from prudent policies and sound governance principles, including in the context of Poland’s electoral calendar,⁸ or a deterioration in relations with the EU.

Authorities’ Views⁹

10. GDP growth is expected to slow gradually in the coming years, with risks originating mainly from abroad. Based on data for the first three quarters, GDP growth for 2018 is expected to exceed the previous year’s outturn. Beginning in late 2018, the pace of growth is expected to moderate on more subdued activity in the euro area and a tight labor market, with growth reaching 3.8 percent in 2019 and 3.7 percent in 2020. However, uncertainty about the scale of the anticipated global GDP slowdown, and with consequences for Poland, is high. Reflecting the absence of external or internal imbalances in Poland, developments abroad pose the most significant risk to Poland’s growth trajectory. These include: (i) a possible escalation of international trade disputes that could disrupt global supply chains; (ii) adverse conditions for the UK’s departure from the EU; and (iii) changes to immigration policy by other EU countries, which could intensify existing labor shortages.

B. Policy Discussions

Monetary Policy: Keeping Inflation Expectations Anchored

11. Inflation is expected to edge up gradually toward the mid-point of the target, but increasingly-unpredictable price developments add considerable uncertainty to the forecast. The tight labor market and some pass-through of higher electricity prices for firms are projected to gradually lift inflation, although strong supply-chain links with the region are expected to continue to limit increases in costs and prices in the tradable sectors. As a result, once the temporary effect of the large decline in financial services prices has dissipated in early 2019, inflation is projected to edge up gradually toward the mid-point of the target on modest growth in unit labor costs and potential second-round effects from energy price increases for firms.¹⁰ In addition, strong corporate profitability would allow firms to absorb much of the rising labor and energy costs without raising output prices. However, this baseline forecast is subject to considerable uncertainty as regards the evolution of the cyclical position, the size of foreign worker inflows and its impact on wage dynamics, as well as the extent of second-round effects from energy price increases. Moreover, increasingly-unpredictable consumer price developments—including large idiosyncratic declines for some items,¹¹ and lack of clarity on changes in administered electricity prices and a possible compensation scheme for households and SMEs—are key risks for the inflation forecasts.¹²

12. Monetary policy should follow a data-dependent approach, and respond only to sustained inflation developments. A stable nominal policy rate of 1.5 percent—consistent with a marginally-negative real rate—in recent years has been appropriately accommodative in the context of inflation persistently below the mid-point of the target. With inflation projected to edge up only gradually toward the mid-point of the target, interest rates should be raised if inflation is approaching the mid-point of the target on a sustained basis. The pace of monetary policy tightening should be attuned to the momentum of inflation and to the stance of other policies, with a faster tightening than otherwise if fiscal policy were to turn expansionary.

Authorities’ Views¹³

13. According to the majority view of the Monetary Policy Council, slowing growth would ensure that any cost-push increase in inflation is short-lived and, in any event, monetary policy should not react to temporary, supply-side shocks. For 2019, headline inflation is forecast to increase on account of rising unit labor costs and higher electricity prices (assuming new tariffs for households are introduced) but to stay well-within the tolerance band, while core inflation will remain below 2.5 percent. Headline inflation is generally seen as returning close to the mid-point of the target by 2020 without the need to raise the policy rate on account of intense competition among companies and slowing GDP growth, notwithstanding a still-sizeable positive output gap. Thus, it is generally expected that inflation will be close to the mid-point of the target at the horizon of monetary policy transmission. Raising the policy rate in response to exogenous price shocks that are beyond the influence of the NBP’s monetary policy would exacerbate the growth slowdown triggered by the adverse effect of higher prices and wages on the financial situation of households and firms. Therefore, measures other than monetary policy should be used to address supply shocks.

Fiscal Policy: Securing Previous Gains

14. Following several years of narrowing imbalances, further substantial reductions in the headline and structural deficits are expected in 2018. In recent years, the cost of several new initiatives (including a generous child benefit program and a reduction in the pension age) was largely offset by revenue from the introduction of a tax on assets of financial institutions and improvements in tax compliance, with little net effect on headline or structural balances. However, the structural position did improve on account of the autonomous effect of indexing some tax thresholds and expenditure items below the rate of nominal GDP growth. The headline balance also benefited from temporary revenue derived from the economy’s buoyant cyclical position and the sharp increase in the number of foreign workers. Including an anticipated year-end acceleration in spending, the headline deficit is on track to reach a record low of 0.6 percent of GDP in 2018 (about 0.8 percentage point below the previous year’s), with the structural deficit declining to around 1½ percent of GDP.¹⁴ Public debt is projected to fall below 50 percent of GDP. For 2019, much of the previous structural improvement is expected to carry forward, although the headline deficit is forecast to increase on account of slowing cyclical revenue. New pre-election measures in 2019–20, including to offset higher electricity costs for additional groups of users, present a risk.¹⁵

15. While the magnitude of past adjustment has been impressive, the quality of the budget has deteriorated over time. Consolidation has relied on measures that will be hard to sustain, notably the compression of wages and social benefits relative to GDP that will depress future living standards.¹⁶ The rising share of nondiscretionary spending, mainly for social transfers, has increased budget rigidity, making future adjustment within the expenditure ceiling more difficult. The proposal to use extrabudgetary funds (which fall outside the budget process and are not covered by the expenditure rule), including to compensate end-users for electricity price increases in 2019, reduces the transparency of the budget process and the usefulness of the rule as a planning and disciplining tool. In addition, such compensation will be difficult to terminate and could foster expectations of similar subsidies in response to future price increases.¹⁷ Earmarking revenue from narrowly-based taxes and levies for financing new spending can create distortions and cause revenue yields to be overestimated. Moreover, public investment is driven by the EU funds cycle, leading to capacity constraints, inefficiencies and procyclical fiscal stimulus.¹⁸

16. Despite the recent structural improvement, additional adjustment is needed, relying on well-specified and sustainable measures. Although public debt remains sustainable (Annex V), fiscal space is at risk under the national expenditure rule and the medium-term objective (MTO)—a structural deficit of one percent of GDP—agreed with the European Commission. While there is some room excluding these fiscal rules, the rapidly-aging population nonetheless constrains space. Reaching and then maintaining the MTO would create room for additional aging-related and health spending, replacing part of declining EU funds with national resources, and providing stimulus in the event of a sustained economic downturn. This would likely require a further adjustment of close to 1 percentage point of GDP, which could be frontloaded because the economy is operating above potential, even though growth is moderating. While Poland’s expenditure stabilizing rule sets nominal spending limits consistent with reaching the MTO and reducing debt to prudent levels, adjustment should be underpinned by clearly-identified and sustainable measures. These could include reducing the proliferation of preferential VAT rates, better-targeting social benefits (including means-testing currently universal programs), eliminating electricity subsidies to households and SMEs, raising the pension age (consistent with past gains in life expectancy), and phasing out generous special pension schemes, while avoiding excessive reliance on further tax compliance gains.¹⁹ A comprehensive review of expenditure and strengthening the medium-term budget framework would help to identify other potential savings from low-priority or less-efficient spending, while also increasing the achievability of the expenditure ceiling and the MTO.

Effect of Selected Structural Measures¹

(Relative to counterfactual; percent of GDP)

Sources: IMF staff calculations.

^{^1/}A positive value indicates higher revenue or lower expenditure.

Effect of Selected Structural Measures¹

(Relative to counterfactual; percent of GDP)

	2016	2017	2018	2019	2020	2021	2022	2023
	Previously Implemented
Revenue	0.6	1.1	1.5	1.6	1.7	1.7	1.7	1.7
Tax compliance gains	0.4	0.8	1.2	1.2	1.3	1.3	1.3	1.3
Financial institutions asset tax	0.2	0.2	0.2	0.2	0.2	0.2	0.2	0.2
PIT gains from bracket creep	0.0	0.0	0.1	0.2	0.2	0.2	0.2	0.2
Expenditure	-0.9	-0.8	-0.5	-0.4	-0.2	-0.1	-0.1	0.1
Child benefits program	-0.9	-1.3	-1.1	-1.0	-1.0	-0.9	-0.9	-0.8
Retirement age cut	0.0	-0.2	-0.5	-0.7	-0.7	-0.7	-0.7	-0.7
Indexation of social spending	0.0	0.6	1.0	1.2	1.4	1.4	1.4	1.5
Real public wage bill freeze	0.0	0.0	0.1	0.1	0.1	0.1	0.1	0.1
	Newly Announced (Included in staff’s baseline)
Revenue - Sale of CO2 emission rights	0.0	0.0	0.0	0.2	0.0	0.0	0.0	0.0
Expenditure	0.0	0.0	-0.1	-0.5	-0.7	-0.9	-1.1	-1.3
Increase health spending	0.0	0.0	0.0	0.0	-0.2	-0.4	-0.6	-0.8
Benefits for disabled, schoolkids and mothers	0.0	0.0	-0.1	-0.1	-0.1	-0.1	-0.1	-0.1
Pension saving plans (PPK)	0.0	0.0	0.0	-0.1	-0.1	-0.1	-0.1	-0.1
Boost of minimum pensions	0.0	0.0	0.0	-0.1	-0.1	-0.1	-0.1	-0.1
Compensation for electricity price increases	0.0	0.0	0.0	-0.2	-0.2	-0.2	-0.2	-0.2

Sources: IMF staff calculations.

^{^1/}A positive value indicates higher revenue or lower expenditure.

Effect of Selected Structural Measures¹

(Relative to counterfactual; percent of GDP)

	2016	2017	2018	2019	2020	2021	2022	2023
	Previously Implemented
Revenue	0.6	1.1	1.5	1.6	1.7	1.7	1.7	1.7
Tax compliance gains	0.4	0.8	1.2	1.2	1.3	1.3	1.3	1.3
Financial institutions asset tax	0.2	0.2	0.2	0.2	0.2	0.2	0.2	0.2
PIT gains from bracket creep	0.0	0.0	0.1	0.2	0.2	0.2	0.2	0.2
Expenditure	-0.9	-0.8	-0.5	-0.4	-0.2	-0.1	-0.1	0.1
Child benefits program	-0.9	-1.3	-1.1	-1.0	-1.0	-0.9	-0.9	-0.8
Retirement age cut	0.0	-0.2	-0.5	-0.7	-0.7	-0.7	-0.7	-0.7
Indexation of social spending	0.0	0.6	1.0	1.2	1.4	1.4	1.4	1.5
Real public wage bill freeze	0.0	0.0	0.1	0.1	0.1	0.1	0.1	0.1
	Newly Announced (Included in staff’s baseline)
Revenue - Sale of CO2 emission rights	0.0	0.0	0.0	0.2	0.0	0.0	0.0	0.0
Expenditure	0.0	0.0	-0.1	-0.5	-0.7	-0.9	-1.1	-1.3
Increase health spending	0.0	0.0	0.0	0.0	-0.2	-0.4	-0.6	-0.8
Benefits for disabled, schoolkids and mothers	0.0	0.0	-0.1	-0.1	-0.1	-0.1	-0.1	-0.1
Pension saving plans (PPK)	0.0	0.0	0.0	-0.1	-0.1	-0.1	-0.1	-0.1
Boost of minimum pensions	0.0	0.0	0.0	-0.1	-0.1	-0.1	-0.1	-0.1
Compensation for electricity price increases	0.0	0.0	0.0	-0.2	-0.2	-0.2	-0.2	-0.2

Sources: IMF staff calculations.

^{^1/}A positive value indicates higher revenue or lower expenditure.

Authorities’ Views

17. Prudent policymaking and a robust fiscal framework will ensure that public debt stabilizes at a prudent level. Permanent revenue gains from narrowing the compliance gap on VAT, which also benefited direct taxes—will help reduce the 2018 headline deficit to around 0.5 percent of GDP, substantially lower than the original deficit target of 2.7 percent of GDP. For 2019, considerable overperformance relative to the headline deficit target of 1.7 percent of GDP is likely due to underspending and conservative revenue forecasts. Thereafter, existing policies and debt-adjustors in the national expenditure rule will lower debt to about 43 percent of GDP by 2022.²⁰ In the event of new spending pressures or a permanent cut to revenue, compliance with the rule necessitates that savings be identified and implemented. Ideally, this should occur within the context of a medium-term budget framework, which has yet to be developed. Pensions do not present a fiscal risk under the notional defined contribution system because payouts are linked to each individual’s own contributions,²¹ and while this implies a declining pension-to-wage replacement rate, the system incentivizes working beyond the minimum pension age to continue to contribute and raise one’s future benefits. In addition, social spending as a share of GDP is on a declining path because pension benefits are indexed well-below nominal GDP and some other social benefits are fixed in nominal terms. This welfare system is fiscally sustainable and also meets the social needs of a population that is aging, but also growing wealthier and more equal.

Financial Stability: Ensuring Sound Supervision

18. The financial system is broadly robust, although pockets of vulnerability exist. As discussed in the accompanying Financial System Stability Assessment (FSSA), stress tests conducted on end-2017 data indicate that, in the aggregate, commercial banks are resilient to sizable-but-plausible macroeconomic, market and liquidity shocks, despite pockets of vulnerability. Introduction of the FIAT prompted banks to shift their asset allocation toward government bonds (which are tax exempt) and to more profitable-but-riskier unsecured consumer credit at the expense of less-profitable, but potentially more-productive, corporate lending (although demand may have shifted to leasing). Replacing the FIAT with a tax on banks’ profits and remuneration (proxying a VAT from which the financial sector is exempt) would be less distortionary for credit allocation and reduce banks’ risk profiles. Moreover, the rapid growth of consumer credit, accompanied by the increasing size and lengthening maturity of individual loans, warrant close monitoring, and targeted macroprudential measures should be deployed if systemic risks arise. The sustained low double-digit growth in zloty-denominated, variable-rate mortgages in recent years occurred in the context of low borrowing costs at origination, and their quality has not been tested under higher interest rate conditions. However, risks are mitigated by the LTV limit and improved affordability. The legacy portfolio of foreign currency-denominated (FX) mortgages has declined to 6½ percent of GDP, loan quality is high, and they do not pose a systemic risk. As with any other loan category, a distressed FX mortgage should be restructured based on a voluntary bilateral agreement between the creditor and the debtor, and mandatory centralized approaches should be avoided. Integration and harmonization of cooperative bank networks should continue, and a re-thinking of the business model for the credit union sector is needed.

19. Strengthening the structure of financial sector oversight would enhance supervision, particularly in the context of tightened bank-sovereign linkages. The Polish Financial Supervision Authority (PFSA) faces severe resource constraints—both budgetary and staffing—and lacks independence over its operational decisions. This impedes the effectiveness of oversight, including of—among others—compliance with AML/CFT requirements. Legislation approved in late-November 2018 may allow better resourcing of the PFSA, which would enable it to better calibrate supervision to institution-specific risks, rather than relying on across-the-board regulatory measures. The amendment, however, gives the government and the president of the Republic a blocking majority on the PFSA’s Board (five of the nine voting-members), exacerbating concerns about the potential for political interference raised by staff in connection with the previous PFSA Board structure (four of the eight voting-members). The further weakening of the PFSA’s independence occurred while state ownership and control of domestic systemically-important banks have risen to 14 percent and 42 percent of assets, respectively (Annex III). While the uniform framework for regulation and supervision may mitigate concerns, the increase in sovereign-bank linkages could lead to “self-regulation” of state-controlled financial intermediaries and compromise sound oversight. Given their significance in the sector, any weakening of supervisory standards for state-controlled banks could have systemic implications. While an over-sized PFSA Board could promote better information sharing,²² it may hinder the efficiency and timeliness of decision making.

20. Addressing shortcomings in the operational independence of supervision and protecting the rights of minority investors are priorities. An appropriate budget and governance structure would ensure: (i) a well-resourced financial supervisor with a robust supervisory capacity; (ii) a structure and composition of the PFSA board that is insulated from undue political influence; (iii) a governance arrangement that allows for efficient operations and timely decision making, while delegating the more technical supervisory tasks to the PFSA chair and staff; and (iv) some formal role for the PFSA in setting regulatory policies and priorities. These principles assume additional importance in view of the significant state control of the financial sector so as to ensure that state- controlled institutions operate on commercial terms, and that supervision across the financial sector is evenhanded and free from conflicts of interest with the government. Absent these safeguards, state ownership of the financial sector should be reduced over time.

Authorities’ Views

21. The banking sector is resilient, although some new risks are emerging. The FSAP stress test finding of system-wide resilience of the banking sector, but with pockets of vulnerability, is realistic. Strong growth of consumer credit, by itself, is not a concern given that household incomes are growing quickly. These loans should be closely monitored, but no supervisory or regulatory action is needed at this time. The FIAT has created only limited and temporary distortions to the interbank market and there is no evidence of credit diversion away from corporate lending. While banks adjusted deposit margins and operating costs after the tax was introduced, their profitability is still lower than before the introduction of the tax. There are no plans to revise the tax. The potential risks from strong growth in zloty-denominated mortgages are being monitored. On FX mortgages, this portfolio does not constitute a significant risk to financial stability.

22. Broad agreement exists on the need to amend the governance structure of the PFSA, although views differ as to the appropriate direction of the reform. The government’s position, subsequently supported by parliament, is that having additional members on the PFSA Board would increase coordination and facilitate information sharing across government agencies and with the Prime Minister, thereby enabling a more-timely and better-targeted response in the event of emerging financial sector risks.²³ The increased government representation on the PFSA Board is appropriate given that any payout of insured deposits is ultimately a fiscal responsibility. On the other hand, the NBP is of the view that the PFSA should be reintegrated into the central bank (it was separated out in 2006) so that it would inherit the independence and protections afforded by the central bank law. The recent increase in state ownership of the financial sector reflects the withdrawal of some foreign shareholders and acquisition by the state. As a result, there is a better balance between domestic and foreign ownership of the sector as foreign-owned banks are more likely to withdraw funding during episodes of external stress, thereby creating spillovers to the domestic economy from external financial shocks. On the other hand, state banks tend to be more countercyclical in their lending practices. The government does not intend to reduce its holdings in the financial sector.

Structural Policies—Revving-up potential growth

23. Growing the effective workforce and boosting labor productivity are key to sustaining rapid and inclusive growth. Lowering the pension age and providing generous child benefits encouraged large numbers of workers to withdraw from the workforce at a time of severe labor shortages.²⁴ Raising the labor force participation of women and older cohorts and continuing to attract foreign workers by permitting longer-term stays would help alleviate near-term constraints on labor supply and real activity.²⁵ However, shifting from labor-intensive production in order to accelerate output per worker is essential to tackle Poland’s severe demographic headwind and to raise per capita income, but is held back by persistently subdued private investment. A 2017 survey of Polish firms finds that skilled labor shortages and an unpredictable tax and regulatory environment are the main barriers to investment.²⁶ Given the complementarity between skilled labor and capital, durably lifting the investment rate requires greater access to high-quality education and job training, a wider international search for well-qualified foreign workers, as well as longer lead-times before new regulations and taxes are implemented and with greater advance-consultation with the business community. With access to EU funds expected to decrease over the medium-to-long run, economy-wide investment should decouple from these flows. Moreover, removing barriers to investment is a prerequisite for the new pension scheme (PPK) to deliver high returns over the longer term (Box 2); otherwise, any new savings—mostly likely modest, and limited to lower-wage workers—would temporarily inflate financial asset prices. The PPK will also increase the wedge between gross and net wages, and in the current tight labor market, the incidence would likely be borne by employers.

24. Ensuring a level playing field is essential in the context of significant state ownership of key industries. Government ownership is high in banking and insurance, energy and transport, and the main Warsaw stock index (WIG20) is dominated by state-controlled enterprises. Firm-level data suggest that state ownership in nonfinancial sectors is associated with lower total factor productivity (TFP) than is private domestic or foreign ownership. Staff estimates that converting all nonfinancial state-owned firms in Poland to private ownership could increase the level of TFP and real GDP by nearly nine percent, while future TFP growth would also be faster.²⁷ This result may reflect the broader mandates of SOEs relative to private firms, and which can also create negative spillovers for other incumbent firms.²⁸ Moreover, state control of financial firms is potentially more problematic than control of nonfinancial firms as it risks politicizing credit allocation and crowding out more-efficient investment projects. As a result, productivity may be lowered across the whole economy. Evenhanded and independent oversight is critical to maintain competition between SOEs and private firms, to protect the property rights of minority shareholders in SOEs, and to safeguard the efficiency of investment. State acquisitions of equity positions in private companies should be limited to cases where market failures are present, and should not be used to prop up—directly or indirectly—industries in decline. Social and macroeconomic objectives are best addressed transparently through the budget, rather than through the operations of SOEs. Despite progress in controlling corruption and resolving insolvency, other indicators generally point to some weakening in the governance framework and adherence to the rule of law in recent years.

25. Compensating end-users for environmental taxes circumvents their purpose. Taxes on carbon and other emissions are intended to reduce demand for electricity and deter generation using heavily polluting sources. Poland generates around 80 percent of its electricity from coal, and carbon emissions fees saw a nearly five-fold increase in the EU- wide market during 2018. Environmental fees are generally seen as falling disproportionately on lower-income segments of the population. The government’s intention to neutralize the impact of these higher fees on electricity prices paid by households and SMEs will insulate end-users’ real incomes, but fail to achieve the environmental goals.²⁹ Already Poland has 33 of the 50 EU cities with the worst air quality, according to the World Health Organization, including Katowice, which hosted the UN’s climate summit in December 2018. Poor air quality carries significant economic costs through reduced labor productivity, additional medical expenditures, and early retirement and premature death. To achieve the environmental goals while avoiding the regressive nature of environmental fees, a preferred approach would be to raise end-user electricity prices, and to rebate users with the revenue collected from the fees or with the proceeds from selling emissions rights.

Authorities’ Views

26. Ongoing implementation of the Strategy for Responsible Development will help to correct mis-steps from earlier decades and support the economy’s future dynamism. Less cumbersome business regulation and lower taxes for SMEs will improve the business climate and encourage entrepreneurship. Changes to the system of vocational training (including greater coordination with enterprises) and incentives for innovation and R&D aim to ensure appropriate skills and technologies to support a digital-based economy. Increasing the still-low rate of labor force participation and encouraging return-migration of the more than 2 million Poles who emigrated since the turn of the century will help to resolve labor shortages in the coming years. Geographical proximity and language similarities are expected to preserve Poland’s attractiveness to foreign workers from neighboring countries, even if higher-income countries were to open their labor markets. While foreign investment has been an important driver of growth, innovation and supply-chain integration, a more-balanced structure of ownership between foreign and domestic capital is now appropriate. Increased state ownership is intended to unwind some of the previous extensive privatizations of major financial and nonfinancial companies that left Poland without any national champions in strategic industries able to compete internationally. An extrabudgetary fund, managed by the PM’s office, and financed by SOE dividends, is being established to acquire stakes in private companies. The PPK scheme is designed to increase household saving to augment individual incomes in retirement, especially in view of the projected decline in the pension-wage replacement rate. At the aggregate level, higher national savings from the PPK will help to deepen Poland’s capital markets and reduce dependence on foreign saving as a source for investment financing. While the scheme may not raise the savings of wealthier employees substantially, savings of low-wage employees are expected to increase owing to government subsidies to encourage their participation.

Staff Appraisal

27. The Polish economy has expanded rapidly alongside narrowing imbalances and improving social indicators. Growth benefited from the euro-area rebound, inflows of EU funds and new social transfers. Amid historically-low unemployment, potential output expanded on the influx of foreign workers, which helped to dampen inflation pressures. Adherence to sound policy frameworks has gradually lowered fiscal and external vulnerabilities and safeguarded financial stability, helping to cement investor confidence and insulate Polish financial markets from the turbulence that beset several emerging economies during the first half of 2018. The level of reserves is broadly adequate, and the external position is assessed to be broadly in line with medium-term fundamentals and desirable policies.

28. The economic outlook is now facing several cross winds. Growth has peaked and is expected to moderate to a more sustainable pace during the next few years on slowing trading- partner demand. Nonetheless, with a still-tight labor market and high capacity utilization, the economy will continue to operate above capacity. Worsening global trade tensions and reduced access to foreign workers are key risks. Over the longer run, and absent structural reforms, potential output will be restrained by population aging, subdued private investment and weak productivity gains.

29. Monetary policy should remain data dependent, in light of increasingly unpredictable price fluctuations and the lack of clarity on the impact of electricity price increases. The current accommodative stance of a negative real policy rate has been appropriate in the context of headline and core inflation persistently below the mid-point of the target. Looking ahead, inflation is forecasted to rise gradually toward the mid-point of the target on account of rising wages and possible second-round effects from energy price increases. However, the increasing unpredictability of large price fluctuations during the past year, as well as the lack of clarity on future electricity price increases and the associated compensation scheme for households and SMEs, give rise to considerable uncertainty regarding the inflation outlook. In these circumstances, monetary policy should remain data dependent and concentrate on guiding inflation to the mid-point of the target. If the momentum of underlying inflation pressures were to accelerate, a faster increase in the policy rate would be warranted to keep the inflation outlook and expectations squarely within the target.

30. Substantial fiscal adjustment was achieved in recent years, bringing the medium-term objective within reach, although the structure of the budget has weakened. Improvements in revenue administration and automatic savings from low rates of indexation are expected to reduce the structural deficit to a historical low in 2018, despite numerous initiatives introduced in recent years that have been funded with new taxes and levies. Similar fiscal outturns are expected for 2019 in the absence of new unfunded spending initiatives. Nonetheless, compressing wages and social benefits relative to GDP may be difficult to sustain over the longer term, while the increasing share of nondiscretionary spending makes the budget more rigid. Spending financed from extrabudgetary funds reduces transparency, while relying on narrowly-based taxes and levies introduces distortions.

31. Sustainable and growth-friendly measures should support the remaining adjustment needed to reach the MTO. Adhering to the ceilings in the expenditure rule would achieve the MTO within the next few years and lower public debt to a moderate level. Specific measures will be needed to deliver this adjustment while also making room for new spending priorities. Continuing to strengthen revenue administration, narrowing the VAT policy gap, more-targeted social benefits and raising the pension age would generate sufficient savings.

32. Overall, the banking sector is sound, although pockets of risk are present. Stress tests conducted in the context of the FSSA reveal that, in the aggregate, the banking sector is resilient to sizable-but-plausible macroeconomic, market and liquidity shocks, but with weaknesses present in a few small and mid-sized banks. Introduction of the FIAT encouraged banks to shift into higher-yielding, but riskier, unsecured consumer lending to help defray the cost of the tax. Replacing the FIAT with one on profits and remuneration would avoid these distortions and the potential increase in systemic risks. Sustained rapid growth in zloty-denominated variable-rate mortgages should be monitored to ensure borrowers have adequate debt-service capacity if interest rates were to increase. Legacy foreign-currency mortgages do not pose a systemic risk, and any conversion into zloty should be on terms agreed bilaterally between the creditor and the debtor.

33. Independent and well-resourced financial supervision is essential for effective and evenhanded oversight, particularly in the context of a state-dominated financial system. The PFSA faces severe resource constraints and lacks autonomy over its budget and operations. Recent legislation does not rectify these concerns and may even increase scope for political interference. The resulting de facto “self-regulation” of state-controlled financial corporations has the potential to create systemic risks when these corporations dominate the financial sector. An over-sized supervisory board may also slow decision-making when there is a premium on taking timely action.

34. Further reforms would help to boost long-term potential growth to overcome the drag from a declining working-age population. Raising labor force participation and remaining attractive to foreign workers even as other countries open their labor markets would provide short-term relief from labor shortages. However, sustaining rapid income convergence calls for raising output per worker through a durable increase in investment. This requires more-reliable access to skilled labor and greater predictability as regards changes in business regulation and taxes. Moreover, providing a level playing field for all investors by protecting the rights of minority shareholders, maintaining a competitive environment in industries with a significant state presence, avoiding inefficient and distortive lending by state-controlled banks and gradually reducing state ownership of the financial sector, and ensuring that price signals reflect economic costs are needed to ensure a wide investor base. Removing existing barriers to investment would allow any savings accumulated under the new pension scheme to support productive investment that, in turn, would deliver higher returns in retirement and support continued income convergence.

35. It is recommended that the next Article IV consultation be held on the standard 12-month cycle.

Box 1.

Foreign Workers and Some Implications for the Polish Economy

The number of foreigners working in Poland has surged since 2014, reflecting both push and pull factors. The rapidly-expanding economy and a shrinking labor force on account of population aging and past emigration has resulted in low unemployment and large numbers of unfilled job openings. To help alleviate labor shortages, simplified procedures for the short-term employment of foreign workers from selected CIS countries were introduced in 2007.¹ On the supply side, the conflict in Eastern Ukraine and its adverse effects on economic activity and the exchange rate made working in Poland an attractive option. In PPP terms, average wages in Poland are three times higher than in Ukraine.² Staff estimates that foreign workers rose from around 1 percent in 2014 to about 5 percent (adjusted for double-accounting) of total employment at end-2017, with more than 90 percent coming from Ukraine.³ However, uncertainty surrounding the number of foreign workers is significant as the ease of hiring makes tracking their number more difficult.⁴ The majority of foreign workers are concentrated in relatively low-skill sectors, and are performing basic tasks.

Adjusting for foreign workers indicates that the recent economic expansion has been labor intensive. Adding effective foreign workers to the labor force survey (LFS)-based employment data suggests that employment grew by 2.8 percent in 2017, notably faster than the 1.4 percent reported in the LFS. Thus, for 2017, the adjusted labor contribution to potential GDP growth doubles to 1.2 percent, with a corresponding 0.6 percentage point downward adjustment to the contribution from TFP. In terms of their effect on domestic demand, the sharp increase in number of foreign workers has contributed to the rapid growth of household consumption, even though foreign workers are thought to repatriate the majority of their earnings as remittances abroad.

¹ An individual foreign worker is permitted to work for up to 6 months within any 12-month period under the “employer’s statement” procedure.² At market exchange rates—arguably the more relevant comparison as many foreign workers repatriate a large share of their income—the difference rises to five times.³ This is measured in effective terms (i.e., adjusted for within-year limits on length of work). Thus, the number of foreign workers is halved to obtain the number of effective foreign workers employed.⁴ Estimates are adjusted downward to account for possible double-counting and employers not filling their work- permits.

Box 2.

A New Private Pension Scheme

According to the government’s Responsible Development Strategy, higher domestic saving and investment—together with a well-developed capital market—are prerequisites for strong and sustainable long-term growth. Given the projected decline in replacement rates under the notional defined-contribution pension system, higher savings are also needed for households’ financial safety in retirement. The recently-approved “Employee Capital Plan” (PPK) is a long-term savings scheme intended to achieve these goals.

PPKs are private, outside the public pension system, and fully-owned by the employee. Participation is automatic for all employees up to 55 years of age, but with the possibility of voluntary opt-out. Official projections envisage that 75 percent of employees (8.6 million persons) will join PPK. The scheme will be rolled-out in stages, beginning in July 2019 with large firms (250+ employees), those with 50–250 employees (January 2020), 20–50 employees (July 2020), and micro-firms and government entities (January 2021).

The total standard contribution is set at 3½ percent of the employees’ gross wage, plus a “welcome bonus” from the state budget for the first year of eligibility to encourage participation. The employee’s standard contribution is 2 percentage points, but reduced to 0.5 percentage points for those earning less than 1.2 times the minimum wage. Employees may voluntarily top-up to 4 percentage points. Employers’ standard contribution is 1.5 percentage point—with voluntary top-up to 4 percentage points. These contributions will increase the wedge between net and gross wages and, given the tight labor market, much of the cost is likely to be borne by employers. Contributions are treated as income of employees and taxed under the PIT, but exempted from social contributions. The state budget will pay a one-time bonus to each new member of PLN250 (about €55), and a yearly bonus of PLN240 if contributions exceed a certain threshold (which is lower for low-wage employees). The authorities project annual private contributions to the PPK of 0.7 percent of GDP by 2021 (1.4 percent of GDP with full top-up), and a fiscal cost of 0.16 percent of GDP. Income on PPK assets is exempted from capital gains tax.

Savings in PPKs will be managed by investment funds, within specific guidelines and with no guaranteed minimum return. Employers will either select an authorized investment fund or, otherwise the savings will be invested by the state-owned Polish Development Fund (PFR). Management fees are capped at 0.5 percent of assets, plus a 0.1 percent “success fee.” Initially, 60–80 percent of assets must be held in equities (of which at least 40 percentage points in WSE quoted blue-chips (WIG20)), although this share will diminish gradually to 15 percent—with a corresponding increase in fixed-income assets—as individual beneficiaries approach retirement. Allowable investments in debt instruments must be issued or guaranteed by the Polish or other EU governments, local authorities, central banks, the EIB, or IFIs. Foreign currency assets may comprise no more than 30 percent of the portfolio.

Payouts will commence when participants reach the age of 60. The first payout will be up to a quarter of assets, with the rest paid as 120 or more monthly installments. No annuities will be offered. Early withdrawal of a quarter of assets is allowed, and full early withdrawal is possible for mortgage down-payment, but must be replenished. Otherwise, early withdrawals will be subject to capital gains tax and social contributions on employer payments at a 30 percent rate.

Table 1.

Republic of Poland: Selected Economic Indicators, 2015–23

Sources: Polish authorities; and IMF staff calculations.

^{^1/}According to ESA2010.

^{^2/}The difference from general government debt reflects different sectoral classification of certain units.

^{^3/}Credit defined as in IFS: “Claims on other sectors.”

^{^4/}NBP Reference Rate (avg).

^{^5/}Annual average (2000=100).

Table 1.

Republic of Poland: Selected Economic Indicators, 2015–23

			2015	2016	2017	2018	2019	2020	2021	2022	2023
						Projections
Activity and prices
	GDP (change in percent)		3.8	3.1	4.8	5.1	3.6	3.0	2.8	2.8	2.8
		Domestic demand	3.3	2.3	4.9	5.9	4.4	3.5	2.7	2.7	2.7
		Private consumption growth	3.0	3.9	4.9	4.3	4.0	3.5	3.0	3.0	3.0
		Public consumption growth	2.3	1.9	3.5	3.0	2.7	2.7	2.6	2.4	2.2
		Domestic fixed investment growth	6.1	-8.2	3.9	8.7	8.6	4.8	2.5	2.5	2.5
		Inventories (contribution to growth)	-0.2	1.2	0.5	1.1	-0.2	0.0	0.0	0.0	0.0
		Net external demand (contribution to growth)	0.6	0.8	0.1	-0.7	-0.6	-0.5	0.1	0.1	0.1
	Output gap		-0.5	-0.5	0.2	0.5	0.5	0.3	0.1	0.0	0.0
	CPI inflation (percent)
		Average	-0.9	-0.6	2.0	1.7	2.3	2.6	2.5	2.5	2.5
		End of period	-0.5	0.8	2.1	1.2	2.6	2.6	2.5	2.5	2.5
	Unemployment rate (average, according to LFS)		7.5	6.2	4.9	3.7	3.5	3.4	3.4	3.4	3.4
Saving and Investment (percent of GDP)
	Saving		20.5	19.3	20.1	20.7	21.0	21.0	20.7	20.5	20.2
	Investment		20.5	19.5	19.7	21.1	21.6	21.8	21.7	21.7	21.6
	Saving -Investment		0.1	-0.3	0.5	-0.4	-0.6	-0.8	-1.0	-1.2	-1.4
Public finances (percent of GDP) ^1/
	General government revenues		39.0	38.9	39.7	40.9	41.1	40.4	40.0	39.7	39.5
	General government expenditures		41.7	41.1	41.1	41.4	41.9	41.7	41.6	41.6	41.6
	General government net lending/borrowing		-2.7	-2.2	-1.4	-0.6	-0.8	-1.3	-1.7	-1.9	-2.1
	General government structural balance		-2.4	-2.3	-2.0	-1.6	-1.7	-1.7	-1.8	-1.8	-1.9
	General government debt		51.3	54.2	50.6	48.6	46.1	44.7	44.1	43.7	43.6
		National definition ^2/	48.7	51.9	48.4	…	…	…	…	…	…
Money and credit
	Private credit (change in percent, end-period) ^3/		7.5	4.9	3.4	6.2	7.4	7.4	6.4	5.9	5.5
	Credit to GDP (percent)		56.9	57.8	56.0	55.5	55.8	56.6	57.3	57.7	57.9
	Deposits (change in percent, end-period)		8.8	8.4	3.8	7.2	6.8	6.2	5.5	5.5	5.5
	Broad money (change in percent, end-period)		9.1	9.6	4.6	7.1	6.7	6.2	5.4	5.4	5.3
	Policy Rate (percent) ^4/		1.6	1.5	1.5	1.5	…	…	…	…	…
Balance of payments
	Current account balance (billion U.S. dollars)		-2.7	-2.5	0.6	-4.4	-5.4	-7.1	-8.8	-10.3	-12.1
		Percent of GDP	-0.6	-0.5	0.1	-0.8	-0.9	-1.1	-1.3	-1.4	-1.5
	Exports of Goods (billion U.S. dollars)		191.0	196.3	228.0	254.2	273.7	292.4	308.7	323.8	338.1
		Export volume growth	7.7	8.8	9.5	6.0	5.7	5.2	5.2	4.9	4.5
	Imports of Goods (billion U.S. dollars)		188.6	193.1	226.5	259.6	281.3	302.5	320.6	336.6	351.3
		Import volume growth	6.6	7.6	10.0	8.0	7.4	6.5	5.2	4.8	4.3
	Terms of trade (index 1995=100)		105.2	106.3	107.0	106.0	107.0	107.6	107.3	107.0	106.9
	Official reserves (billion U.S. dollars)		94.9	114.4	113.3	113.7	114.0	114.6	115.3	115.9	116.5
		In percent of short-term debt plus CA deficit	85.5	88.5	97.6	101.6	98.0	98.2	98.4	98.1	100.8
		In percent of IMF ARA metric	111.2	126.5	112.7
	Total external debt (billion U.S. dollars)		330.0	335.9	378.6	378.0	383.0	389.9	398.8	409.5	424.6
		In percent of GDP	69.4	71.7	72.1	68.2	64.6	60.5	57.5	54.8	52.7
Exchange rate
	Exchange rate regime		Freely floating
	Zloty per USD, period average		3.8	3.9	3.8	…	…	…	…	…	…
	Zloty per Euro, period average		4.2	4.4	4.3	…	…	…	…	…	…
	Real effective exchange rate (INS, CPI based) ^5/		105.5	100.9	104.3	…	…	…	…	…	…
		Appreciation (percent change)	-3.4	-4.4	3.4	…	…	…	…	…	…
Memorandum item:
	Nominal GDP (billion zloty)		1800.2	1861.1	1988.7	2125.4	2270.8	2404.7	2528.4	2658.6	2795.9

Sources: Polish authorities; and IMF staff calculations.

^{^1/}According to ESA2010.

^{^2/}The difference from general government debt reflects different sectoral classification of certain units.

^{^3/}Credit defined as in IFS: “Claims on other sectors.”

^{^4/}NBP Reference Rate (avg).

^{^5/}Annual average (2000=100).

Table 1.

Republic of Poland: Selected Economic Indicators, 2015–23

			2015	2016	2017	2018	2019	2020	2021	2022	2023
						Projections
Activity and prices
	GDP (change in percent)		3.8	3.1	4.8	5.1	3.6	3.0	2.8	2.8	2.8
		Domestic demand	3.3	2.3	4.9	5.9	4.4	3.5	2.7	2.7	2.7
		Private consumption growth	3.0	3.9	4.9	4.3	4.0	3.5	3.0	3.0	3.0
		Public consumption growth	2.3	1.9	3.5	3.0	2.7	2.7	2.6	2.4	2.2
		Domestic fixed investment growth	6.1	-8.2	3.9	8.7	8.6	4.8	2.5	2.5	2.5
		Inventories (contribution to growth)	-0.2	1.2	0.5	1.1	-0.2	0.0	0.0	0.0	0.0
		Net external demand (contribution to growth)	0.6	0.8	0.1	-0.7	-0.6	-0.5	0.1	0.1	0.1
	Output gap		-0.5	-0.5	0.2	0.5	0.5	0.3	0.1	0.0	0.0
	CPI inflation (percent)
		Average	-0.9	-0.6	2.0	1.7	2.3	2.6	2.5	2.5	2.5
		End of period	-0.5	0.8	2.1	1.2	2.6	2.6	2.5	2.5	2.5
	Unemployment rate (average, according to LFS)		7.5	6.2	4.9	3.7	3.5	3.4	3.4	3.4	3.4
Saving and Investment (percent of GDP)
	Saving		20.5	19.3	20.1	20.7	21.0	21.0	20.7	20.5	20.2
	Investment		20.5	19.5	19.7	21.1	21.6	21.8	21.7	21.7	21.6
	Saving -Investment		0.1	-0.3	0.5	-0.4	-0.6	-0.8	-1.0	-1.2	-1.4
Public finances (percent of GDP) ^1/
	General government revenues		39.0	38.9	39.7	40.9	41.1	40.4	40.0	39.7	39.5
	General government expenditures		41.7	41.1	41.1	41.4	41.9	41.7	41.6	41.6	41.6
	General government net lending/borrowing		-2.7	-2.2	-1.4	-0.6	-0.8	-1.3	-1.7	-1.9	-2.1
	General government structural balance		-2.4	-2.3	-2.0	-1.6	-1.7	-1.7	-1.8	-1.8	-1.9
	General government debt		51.3	54.2	50.6	48.6	46.1	44.7	44.1	43.7	43.6
		National definition ^2/	48.7	51.9	48.4	…	…	…	…	…	…
Money and credit
	Private credit (change in percent, end-period) ^3/		7.5	4.9	3.4	6.2	7.4	7.4	6.4	5.9	5.5
	Credit to GDP (percent)		56.9	57.8	56.0	55.5	55.8	56.6	57.3	57.7	57.9
	Deposits (change in percent, end-period)		8.8	8.4	3.8	7.2	6.8	6.2	5.5	5.5	5.5
	Broad money (change in percent, end-period)		9.1	9.6	4.6	7.1	6.7	6.2	5.4	5.4	5.3
	Policy Rate (percent) ^4/		1.6	1.5	1.5	1.5	…	…	…	…	…
Balance of payments
	Current account balance (billion U.S. dollars)		-2.7	-2.5	0.6	-4.4	-5.4	-7.1	-8.8	-10.3	-12.1
		Percent of GDP	-0.6	-0.5	0.1	-0.8	-0.9	-1.1	-1.3	-1.4	-1.5
	Exports of Goods (billion U.S. dollars)		191.0	196.3	228.0	254.2	273.7	292.4	308.7	323.8	338.1
		Export volume growth	7.7	8.8	9.5	6.0	5.7	5.2	5.2	4.9	4.5
	Imports of Goods (billion U.S. dollars)		188.6	193.1	226.5	259.6	281.3	302.5	320.6	336.6	351.3
		Import volume growth	6.6	7.6	10.0	8.0	7.4	6.5	5.2	4.8	4.3
	Terms of trade (index 1995=100)		105.2	106.3	107.0	106.0	107.0	107.6	107.3	107.0	106.9
	Official reserves (billion U.S. dollars)		94.9	114.4	113.3	113.7	114.0	114.6	115.3	115.9	116.5
		In percent of short-term debt plus CA deficit	85.5	88.5	97.6	101.6	98.0	98.2	98.4	98.1	100.8
		In percent of IMF ARA metric	111.2	126.5	112.7
	Total external debt (billion U.S. dollars)		330.0	335.9	378.6	378.0	383.0	389.9	398.8	409.5	424.6
		In percent of GDP	69.4	71.7	72.1	68.2	64.6	60.5	57.5	54.8	52.7
Exchange rate
	Exchange rate regime		Freely floating
	Zloty per USD, period average		3.8	3.9	3.8	…	…	…	…	…	…
	Zloty per Euro, period average		4.2	4.4	4.3	…	…	…	…	…	…
	Real effective exchange rate (INS, CPI based) ^5/		105.5	100.9	104.3	…	…	…	…	…	…
		Appreciation (percent change)	-3.4	-4.4	3.4	…	…	…	…	…	…
Memorandum item:
	Nominal GDP (billion zloty)		1800.2	1861.1	1988.7	2125.4	2270.8	2404.7	2528.4	2658.6	2795.9

Sources: Polish authorities; and IMF staff calculations.

^{^1/}According to ESA2010.

^{^2/}The difference from general government debt reflects different sectoral classification of certain units.

^{^3/}Credit defined as in IFS: “Claims on other sectors.”

^{^4/}NBP Reference Rate (avg).

^{^5/}Annual average (2000=100).

Table 2.

Republic of Poland: Balance of Payments on Transaction Basis, 2013–23

(Millions of U.S. dollars, unless otherwise indicated)

Sources: National Bank of Poland; and IMF staff calculations.

^{^1/}Net reserves are calculated as a difference between gross reserves (official and other FX reserves) and FX liabilities.

^{^2/}Short-term debt is on remaining maturity.

Table 2.

Republic of Poland: Balance of Payments on Transaction Basis, 2013–23

(Millions of U.S. dollars, unless otherwise indicated)

			2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023
								Projections
Current account balance			-6,744	-11,444	-2,659	-2,458	602	-4,404	-5,430	-7,137	-8,777	-10,338	-12,078
	percent of GDP		-1.3	-2.1	-0.6	-0.5	0.1	-0.8	-0.9	-1.1	-1.3	-1.4	-1.5
	Trade balance		9,692	7,755	14,575	18,721	21,843	18,705	18,896	18,806	19,020	19,479	20,538
		percent of GDP	1.8	1.4	3.1	4.0	4.2	3.4	3.2	2.9	2.7	2.6	2.5
	Balance on Goods		-453	-4,291	2,464	3,263	1,539	-5,410	-7,626	-10,129	-11,832	-12,815	-13,207
		Merchandise exports f.o.b.	198,107	210,628	191,023	196,340	228,046	254,181	273,661	292,393	308,733	323,804	338,092
		Merchandise imports f.o.b.	198,560	214,919	188,559	193,077	226,507	259,591	281,288	302,523	320,565	336,619	351,299
	Balance on Services		10,145	12,046	12,111	15,458	20,304	24,115	26,522	28,936	30,851	32,294	33,746
		Merchandise exports f.o.b.	44,629	48,723	45,098	49,713	58,738	66,452	71,545	76,771	81,062	85,018	88,770
		Merchandise imports f.o.b.	34,484	36,677	32,987	34,255	38,434	42,337	45,022	47,836	50,210	52,725	55,024
	Exports of goods and services
		percentage change in unit values	9.2	6.8	-9.0	4.2	16.6	11.5	7.7	6.8	5.6	4.9	4.4
		percentage volume growth	6.1	6.7	7.7	8.8	9.5	6.0	5.7	5.2	5.2	4.9	4.5
	Imports of goods and services
		percentage change in unit values	3.5	8.0	-11.9	2.6	16.5	14.6	8.4	7.5	6.0	5.0	4.4
		percentage volume growth	1.7	10.0	6.6	7.6	10.0	8.0	7.4	6.5	5.2	4.8	4.3
	Terms of trade (percentage change)		1.2	1.8	1.8	1.1	0.6	-0.9	1.0	0.6	-0.4	-0.2	-0.1
	Primary Income balance		-15,896	-18,649	-16,284	-19,645	-21,112	-22,868	-24,055	-25,517	-27,224	-29,015	-32,404
	Secondary Income balance		-540	-550	-950	-1,534	-129	-242	-272	-426	-572	-803	-212
Capital and financial account balance			5,946	6,955	12,084	6,285	5,415	5,191	2,906	-13	-3,160	-6,089	-15,645
Capital account balance (net)			11,964	13,305	11,331	4,884	6,798	8,515	7,886	7,279	6,526	5,842	1,934
Financial account balance (net)			-6,018	-6,350	753	1,401	-1,383	-3,325	-4,980	-7,292	-9,686	-11,931	-17,579
	Foreign direct investment (net)[+ = outflows]		-4,206	-12,977	-10,152	-4,398	-6,463	-13,797	-10,657	-10,464	-10,180	-10,179	-10,170
		Assets [Increase = +]	-3,411	6,799	4,913	13,923	4,210	1,700	4,500	4,875	5,119	5,233	5,416
		Liabilities [Increase = +]	795	19,776	15,065	18,321	10,673	15,497	15,157	15,339	15,299	15,412	15,586
	Portfolio investment (net)		-237	2,250	3,176	-3,712	-4,797	4,162	873	114	-1,114	-2,777	-6,928
		Assets	2,162	5,866	11,035	-5,936	1,217	1,300	3,350	3,518	3,588	3,660	3,733
		Liabilities	2,399	3,616	7,859	-2,224	6,014	-2,862	2,477	3,404	4,702	6,437	10,661
	Other investment (net)		-1,810	4,137	7,572	-13,334	18,862	7,269	4,435	2,463	980	400	-1,100
		Assets	1,559	4,453	5,153	2,777	6,408	6,569	4,500	3,600	2,980	2,500	1,200
		Liabilities	3,369	316	-2,419	16,111	-12,454	-700	65	1,137	2,000	2,100	2,300
	Financial derivatives		-710	-64	-978	184	-1,197	-1,350	0	0	0	0	0
Errors and omissions			-11,238	-8,211	-7,919	-1,025	-8,783	-7,435	-7,435	-7,435	-7,435	-7,435	-7,435
Financing
	Reserve assets [Increase = +]		945	304	1,135	22,661	-7,788	391	369	594	628	626	619
Memorandum items:
Current plus capital account (percent of GDP)			1.0	0.3	1.8	0.5	1.4	0.7	0.4	0.0	-0.3	-0.6	-1.3
Gross official Reserve			106,220	100,438	94,922	114,391	113,279	113,670	114,039	114,634	115,262	115,887	116,506
	in months of imports		6.4	5.6	6.0	7.1	6.0	5.3	4.9	4.5	4.3	4.1	4.0
Gross official Reserve (euro)			79,976	75,583	85,544	103,371	100,322	…	…	…	…	…	…
Net Reserves (USD) ^1/			95,535	93,050	86,805	91,820	97,661	99,253	100,622	101,716	102,544	103,170	103,789
Ratio of gross official reserves to short-term debt ^2/			72.7	89.3	87.4	88.1	101.5	106.8	104.4	106.2	107.9	109.3	110.7
Ratio of gross official reserves to ST debt plus CA deficit ^2/			67.4	87.2	85.5	88.5	97.6	101.6	98.0	98.2	98.4	98.1	100.8
Ratio of gross official reserves to IMF ARA metric			105.6	110.6	111.2	126.5	112.7	…	…	…	…	…	…
Ratio of net official reserves to IMF ARA metric			95.0	102.5	101.7	101.5	97.6
Total external debt (percent of GDP)			73.2	65.4	69.4	71.7	72.1	68.2	64.6	60.5	57.5	54.8	52.7
Total external debt (percent of exports)			158.2	137.5	140.2	137.2	132.0	117.9	111.0	105.6	102.3	100.2	99.5
External debt service (percent of exports)			57.0	56.2	49.0	55.3	47.7	37.8	35.3	32.8	31.0	29.5	28.3

Sources: National Bank of Poland; and IMF staff calculations.

^{^1/}Net reserves are calculated as a difference between gross reserves (official and other FX reserves) and FX liabilities.

^{^2/}Short-term debt is on remaining maturity.

Table 2.

Republic of Poland: Balance of Payments on Transaction Basis, 2013–23

(Millions of U.S. dollars, unless otherwise indicated)

			2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023
								Projections
Current account balance			-6,744	-11,444	-2,659	-2,458	602	-4,404	-5,430	-7,137	-8,777	-10,338	-12,078
	percent of GDP		-1.3	-2.1	-0.6	-0.5	0.1	-0.8	-0.9	-1.1	-1.3	-1.4	-1.5
	Trade balance		9,692	7,755	14,575	18,721	21,843	18,705	18,896	18,806	19,020	19,479	20,538
		percent of GDP	1.8	1.4	3.1	4.0	4.2	3.4	3.2	2.9	2.7	2.6	2.5
	Balance on Goods		-453	-4,291	2,464	3,263	1,539	-5,410	-7,626	-10,129	-11,832	-12,815	-13,207
		Merchandise exports f.o.b.	198,107	210,628	191,023	196,340	228,046	254,181	273,661	292,393	308,733	323,804	338,092
		Merchandise imports f.o.b.	198,560	214,919	188,559	193,077	226,507	259,591	281,288	302,523	320,565	336,619	351,299
	Balance on Services		10,145	12,046	12,111	15,458	20,304	24,115	26,522	28,936	30,851	32,294	33,746
		Merchandise exports f.o.b.	44,629	48,723	45,098	49,713	58,738	66,452	71,545	76,771	81,062	85,018	88,770
		Merchandise imports f.o.b.	34,484	36,677	32,987	34,255	38,434	42,337	45,022	47,836	50,210	52,725	55,024
	Exports of goods and services
		percentage change in unit values	9.2	6.8	-9.0	4.2	16.6	11.5	7.7	6.8	5.6	4.9	4.4
		percentage volume growth	6.1	6.7	7.7	8.8	9.5	6.0	5.7	5.2	5.2	4.9	4.5
	Imports of goods and services
		percentage change in unit values	3.5	8.0	-11.9	2.6	16.5	14.6	8.4	7.5	6.0	5.0	4.4
		percentage volume growth	1.7	10.0	6.6	7.6	10.0	8.0	7.4	6.5	5.2	4.8	4.3
	Terms of trade (percentage change)		1.2	1.8	1.8	1.1	0.6	-0.9	1.0	0.6	-0.4	-0.2	-0.1
	Primary Income balance		-15,896	-18,649	-16,284	-19,645	-21,112	-22,868	-24,055	-25,517	-27,224	-29,015	-32,404
	Secondary Income balance		-540	-550	-950	-1,534	-129	-242	-272	-426	-572	-803	-212
Capital and financial account balance			5,946	6,955	12,084	6,285	5,415	5,191	2,906	-13	-3,160	-6,089	-15,645
Capital account balance (net)			11,964	13,305	11,331	4,884	6,798	8,515	7,886	7,279	6,526	5,842	1,934
Financial account balance (net)			-6,018	-6,350	753	1,401	-1,383	-3,325	-4,980	-7,292	-9,686	-11,931	-17,579
	Foreign direct investment (net)[+ = outflows]		-4,206	-12,977	-10,152	-4,398	-6,463	-13,797	-10,657	-10,464	-10,180	-10,179	-10,170
		Assets [Increase = +]	-3,411	6,799	4,913	13,923	4,210	1,700	4,500	4,875	5,119	5,233	5,416
		Liabilities [Increase = +]	795	19,776	15,065	18,321	10,673	15,497	15,157	15,339	15,299	15,412	15,586
	Portfolio investment (net)		-237	2,250	3,176	-3,712	-4,797	4,162	873	114	-1,114	-2,777	-6,928
		Assets	2,162	5,866	11,035	-5,936	1,217	1,300	3,350	3,518	3,588	3,660	3,733
		Liabilities	2,399	3,616	7,859	-2,224	6,014	-2,862	2,477	3,404	4,702	6,437	10,661
	Other investment (net)		-1,810	4,137	7,572	-13,334	18,862	7,269	4,435	2,463	980	400	-1,100
		Assets	1,559	4,453	5,153	2,777	6,408	6,569	4,500	3,600	2,980	2,500	1,200
		Liabilities	3,369	316	-2,419	16,111	-12,454	-700	65	1,137	2,000	2,100	2,300
	Financial derivatives		-710	-64	-978	184	-1,197	-1,350	0	0	0	0	0
Errors and omissions			-11,238	-8,211	-7,919	-1,025	-8,783	-7,435	-7,435	-7,435	-7,435	-7,435	-7,435
Financing
	Reserve assets [Increase = +]		945	304	1,135	22,661	-7,788	391	369	594	628	626	619
Memorandum items:
Current plus capital account (percent of GDP)			1.0	0.3	1.8	0.5	1.4	0.7	0.4	0.0	-0.3	-0.6	-1.3
Gross official Reserve			106,220	100,438	94,922	114,391	113,279	113,670	114,039	114,634	115,262	115,887	116,506
	in months of imports		6.4	5.6	6.0	7.1	6.0	5.3	4.9	4.5	4.3	4.1	4.0
Gross official Reserve (euro)			79,976	75,583	85,544	103,371	100,322	…	…	…	…	…	…
Net Reserves (USD) ^1/			95,535	93,050	86,805	91,820	97,661	99,253	100,622	101,716	102,544	103,170	103,789
Ratio of gross official reserves to short-term debt ^2/			72.7	89.3	87.4	88.1	101.5	106.8	104.4	106.2	107.9	109.3	110.7
Ratio of gross official reserves to ST debt plus CA deficit ^2/			67.4	87.2	85.5	88.5	97.6	101.6	98.0	98.2	98.4	98.1	100.8
Ratio of gross official reserves to IMF ARA metric			105.6	110.6	111.2	126.5	112.7	…	…	…	…	…	…
Ratio of net official reserves to IMF ARA metric			95.0	102.5	101.7	101.5	97.6
Total external debt (percent of GDP)			73.2	65.4	69.4	71.7	72.1	68.2	64.6	60.5	57.5	54.8	52.7
Total external debt (percent of exports)			158.2	137.5	140.2	137.2	132.0	117.9	111.0	105.6	102.3	100.2	99.5
External debt service (percent of exports)			57.0	56.2	49.0	55.3	47.7	37.8	35.3	32.8	31.0	29.5	28.3

Sources: National Bank of Poland; and IMF staff calculations.

^{^1/}Net reserves are calculated as a difference between gross reserves (official and other FX reserves) and FX liabilities.

^{^2/}Short-term debt is on remaining maturity.

Table 3.

Republic of Poland: Statement of Operations of General Government, 2013–23

(Percent of GDP)

Sources: Eurostat; and IMF staff calculations.

^{^1/}Includes grants.

Table 3.

Republic of Poland: Statement of Operations of General Government, 2013–23

(Percent of GDP)

						2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023
											Projections
Revenue						38.5	38.7	39.0	38.9	39.7	40.9	41.1	40.4	40.0	39.7	39.5
		Taxes				19.6	19.6	19.8	20.6	21.2	21.9	21.9	21.7	21.6	21.6	21.5
					Personal income tax	4.6	4.6	4.7	4.8	4.9	5.2	5.2	5.1	5.0	5.0	4.9
					Corporate income tax	1.8	1.7	1.8	1.8	1.9	2.1	2.0	2.0	2.0	2.0	2.0
					VAT	7.0	7.1	7.0	7.1	7.8	8.0	8.0	8.0	8.0	8.0	8.0
					Excises	3.7	3.6	3.5	3.5	3.5	3.5	3.5	3.5	3.5	3.5	3.5
					Other taxes	2.5	2.6	2.8	3.3	3.1	3.1	3.1	3.1	3.1	3.1	3.1
		Social contributions				13.4	13.2	13.5	13.8	13.9	14.1	14.0	14.0	13.9	13.8	13.7
		Other revenue				5.5	5.8	5.6	4.4	4.7	4.9	5.2	4.7	4.5	4.3	4.3
					Capital revenue	1.0	1.2	1.1	0.6	0.7	0.9	1.1	0.8	0.5	0.4	0.3
					Sales of goods and services	2.4	2.5	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
					Other current revenue	2.2	2.1	2.1	1.4	1.6	1.6	1.8	1.6	1.6	1.6	1.6
Expenditure						42.6	42.4	41.7	41.1	41.1	41.4	41.9	41.7	41.6	41.6	41.6
	Expense					38.8	38.1	37.3	37.9	37.4	37.2	37.2	37.3	37.6	37.7	37.8
			Compensation of employees			10.4	10.4	10.2	10.2	10.2	10.1	10.1	10.2	10.3	10.4	10.4
			Use of goods and services			5.8	5.9	5.9	5.7	5.5	5.5	5.5	5.5	5.5	5.5	5.5
			Interest			2.5	1.9	1.8	1.7	1.6	1.5	1.5	1.5	1.5	1.5	1.5
			Subsidies			0.7	0.7	0.5	0.5	0.5	0.5	0.5	0.5	0.5	0.5	0.5
			Social benefits			16.4	16.3	16.2	17.2	17.0	16.8	16.9	16.9	17.1	17.1	17.2
			Other expense ^1/			3.0	2.9	2.8	2.5	2.7	2.7	2.7	2.7	2.7	2.7	2.7
					Other current expenditure	2.3	2.1	2.2	2.0	1.9	1.9	1.9	1.9	1.9	1.9	1.9
					Capital transfers	0.6	0.7	0.6	0.5	0.8	0.8	0.8	0.8	0.8	0.8	0.8
	Net acquisition of nonfinancial assets					3.8	4.2	4.2	3.2	3.8	4.2	4.6	4.4	4.1	3.9	3.8
Gross operating balance						-0.3	0.6	1.6	0.8	2.3	3.7	3.8	3.1	2.4	2.0	1.7
Net lending/borrowing						-4.1	-3.6	-2.7	-2.2	-1.4	-0.6	-0.8	-1.3	-1.7	-1.9	-2.1
Structural fiscal balance						-3.6	-3.1	-2.4	-2.3	-2.0	-1.6	-1.7	-1.7	-1.8	-1.8	-1.9
Net financial transactions						-4.2	-3.7	-2.7	-2.3	-1.5	-0.6	-0.8	-1.3	-1.7	-1.9	-2.1
		Net acquisition of financial assets				-1.2	0.8	0.0	2.0	-0.1	0.0	0.0	0.0	0.0	0.0	0.0
				Currency and deposits		-1.1	0.6	-0.9	0.9	-0.2	-0.4	-0.4	-0.5	-0.4	-0.3	-0.3
				Debt securities		0.2	-0.2	0.0	0.1	0.2	0.0	0.0	0.0	0.0	0.0	0.0
				Loans		0.0	0.2	0.0	0.1	0.0	0.0	0.0	0.0	0.0	0.0	0.0
				Equity and investment fund shares		-0.6	0.2	-0.1	-0.2	0.0	0.0	0.0	0.0	0.0	0.0	0.0
				Other financial assets		0.4	0.0	1.0	1.1	-0.1	0.4	0.4	0.5	0.4	0.3	0.3
	Net incurrence of liabilities					2.9	4.4	2.6	4.3	1.4	0.6	0.8	1.4	1.7	2.0	2.2
				Currency and deposits		0.0	0.0	0.2	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
				Debt securities		2.1	-5.9	1.7	3.8	1.1	0.1	0.4	1.0	1.4	1.6	1.8
				Loans		0.7	0.9	0.6	-0.1	-0.1	0.3	0.3	0.2	0.1	0.1	0.2
				Other liabilities		0.1	9.3	0.0	0.7	0.5	0.2	0.2	0.2	0.2	0.2	0.2
Adjustment and statistical discrepancies						0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Memorandum items:
Cyclically-adjusted balance						-3.6	-3.1	-2.4	-2.3	-2.0	-1.6	-1.7	-1.7	-1.8	-1.8	-1.9
Primary balance						-1.6	-1.7	-0.9	-0.6	0.1	0.9	0.7	0.2	-0.2	-0.5	-0.7
Cyclically-adjusted primary balance						-1.1	-1.2	-0.6	-0.6	-0.5	-0.1	-0.2	-0.2	-0.3	-0.3	-0.4
General government debt						55.7	50.4	51.3	54.2	50.6	48.6	46.1	44.7	44.1	43.7	43.6
General government liabilities						65.0	70.1	69.4	72.1	67.8	64.0	61.6	60.2	59.6	59.2	59.1
General government financial assets						27.4	28.0	27.4	29.0	27.1	24.4	23.4	22.4	21.4	20.4	19.4
Nominal GDP in billions of zloty						1,657	1,720	1,800	1,861	1,989	2,125	2,271	2,405	2,528	2,659	2,796

Sources: Eurostat; and IMF staff calculations.

^{^1/}Includes grants.

Table 3.

Republic of Poland: Statement of Operations of General Government, 2013–23

(Percent of GDP)

				2013	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023
									Projections
Revenue				38.5	38.7	39.0	38.9	39.7	40.9	41.1	40.4	40.0	39.7	39.5
		Taxes		19.6	19.6	19.8	20.6	21.2	21.9	21.9	21.7	21.6	21.6	21.5
			Personal income tax	4.6	4.6	4.7	4.8	4.9	5.2	5.2	5.1	5.0	5.0	4.9
			Corporate income tax	1.8	1.7	1.8	1.8	1.9	2.1	2.0	2.0	2.0	2.0	2.0
			VAT	7.0	7.1	7.0	7.1	7.8	8.0	8.0	8.0	8.0	8.0	8.0
			Excises	3.7	3.6	3.5	3.5	3.5	3.5	3.5	3.5	3.5	3.5	3.5
			Other taxes	2.5	2.6	2.8	3.3	3.1	3.1	3.1	3.1	3.1	3.1	3.1
		Social contributions		13.4	13.2	13.5	13.8	13.9	14.1	14.0	14.0	13.9	13.8	13.7
		Other revenue		5.5	5.8	5.6	4.4	4.7	4.9	5.2	4.7	4.5	4.3	4.3
			Capital revenue	1.0	1.2	1.1	0.6	0.7	0.9	1.1	0.8	0.5	0.4	0.3
			Sales of goods and services	2.4	2.5	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4	2.4
			Other current revenue	2.2	2.1	2.1	1.4	1.6	1.6	1.8	1.6	1.6	1.6	1.6
Expenditure				42.6	42.4	41.7	41.1	41.1	41.4	41.9	41.7	41.6	41.6	41.6
	Expense			38.8	38.1	37.3	37.9	37.4	37.2	37.2	37.3	37.6	37.7	37.8

Topics

Countries

Series

About

Resources

Abstract

Context

Recent Developments

Report on the Discussions

A. Outlook and Risks

Authorities’ Views9

B. Policy Discussions

Monetary Policy: Keeping Inflation Expectations Anchored

Authorities’ Views13

Fiscal Policy: Securing Previous Gains

Authorities’ Views

Financial Stability: Ensuring Sound Supervision

Authorities’ Views

Structural Policies—Revving-up potential growth

Authorities’ Views

Staff Appraisal

Authorities’ Views⁹

Authorities’ Views¹³