According to the latest report from the European Commission, Poland’s public debt is set to rise to almost 80% of the country’s GDP by 2034 – an assessment that economist Jakub Sawulki sees as pessimistic, although he warns that current trends they’re not that reassuring.
The Commission recently published the Debt Sustainability Monitor, which provides an overview of the fiscal sustainability challenges facing EU countries in the short, medium and long term, predicting that Poland will have the third most significant increase among EU Member States. the EU between now and 2034.
Sawulki, for his part, predicts that Polish public debt will rise from the current 50% of GDP to 77% in 2034. “Low GDP growth and high rates, accompanied by a high deficit, would lead to an explosion of public debt” , Sawulski emphasized https://twitter.com/jakubsawulski/status/1772886827201900707.
Sawulki’s projections are based on the assumption of no changes in fiscal policy, which in the case of Poland would mean keeping the deficit high, but also slow GDP growth, which should not exceed 2% after 2030, and high interest rates, which should rise from the current 2% to 4% after 2030.
While recognizing an “explosion” of public debt, Sawulski considers the Commission’s forecasts particularly pessimistic and unlikely, stating that it is difficult to predict the realization of all conditions (deficits, interest rates and GDP growth).
The forecast should therefore be considered a “worst-case scenario,” Sawulski said.
However, this does not mean that Poland should ignore the Commission’s forecasts because, under the new EU fiscal rules, they will form the basis for evaluating the country’s deficit reduction efforts. Poland should therefore keep its deficit below 60% in the medium term, Sawulski explained.
What could help Poland is special treatment for defense spending, which could have an impact on the required deficit reduction, which is currently unpredictable.
In any case, Sawulski added, Poland must prepare for fiscal consolidation, look for new sources to finance increased spending and remember that EU fiscal rules are becoming more complicated, not simpler.
After slowing growth in 2023, the EU enters 2024 with worse-than-expected economic results, according to the Commission report. According to the data, by 2025 six Member States will have debt levels above 90%.
In the medium term, up to 2034, nine member states, including Poland, are at high risk of seeing their public debt increase sharply. In the long term, up to 2070, Poland is one of 14 countries with a medium risk to financial stability.
(Aleksandra Krzysztoszek | Euractiv.pl)
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