Poland Macro Weekly: On a long way down with the deficit

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TOP MACRO THEME(S):

• CEE central banks exert pressure on the NBP (p. 2) – the CNB and the MNB remain in cautious easing cycles and see some room for further rate cuts this year, while the NBR may stick to the pause-mode at least until the start of 2025.

WHAT ELSE CAUGHT OUR EYE:

• The government has adopted the Medium-Term Budgetary and Structural Plan for 2025-2028, which sets the path for exiting the EU's excessive deficit procedure. The plan's implementation is expected to ensure a reduction in the nominal deficit of the general government sector from 5.5% of GDP, forecasted for 2025, to 2.9% of GDP by 2028 (see the detailed path below). The sector's debt will be placed on a downward path in 2028 (peaking at 61.3% of GDP in 2027), aiming to return below 60% of GDP by 2030. The plan anticipates an uneven distribution of deficit reduction over time – next year, in line with the draft budget bill, it will amount to 0.25% of GDP, with greater efforts in subsequent years, averaging 1% of GDP. As noted in the plan, a key challenge for its implementation will be high defense expenditures (without defense investments, the improvement in the nominal deficit in 2025 would be 0.5% of GDP). Plan will be forwarded to the EC and the Council of the EU for assessment and subsequent recommendation.
• Prime Minister D.Tusk announced that this Saturday he will present Poland's multi-annual migration strategy, which will not only be a program to fight illegal immigration, but also a modern migration policy designed to last for years. It will constitute a proposal for the entire European Union. The strategy has been developed for 2025-2030.
• As of the end of August, Poland received EUR 11.4bn from the RRF funds (out of total EUR 60bn available), incl. EUR 3.3bn in grants and EUR 8.1bn in loans.

THE WEEK AHEAD:

• The week ahead will start with the CAB data for August, followed by the final estimate of September CPI inflation (flash: 4.9% y/y) and subsequently the core inflation (est.: 4.3% y/y).

NUMBER OF THE WEEK:

• 0.1% – Polish economy merely grew in 2023 according to revised GDP growth data for 2023; growth rate in 2022 was also slightly lower.

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