Deficit falls on back of a strong economy

Budget forecasts at the beginning of 2007 predicted expenditure at 30 bln zloty above income for the year. In August a surplus of 275 mln zloty was recorded, September followed this positive trend with no deficit recorded for the month.

Forecasters had expected the budget deficit to be at 18.55 bln zloty by this period.The latest revised figures put the budget deficit at around 21 bln zloty for year’s end, down almost a third on initial estimates.This is the most positive fiscal report for Poland since the fall of communism in 1989 according to Gilowska.The lower deficit is largely due to higher-than-expected economic growth, resulting in increased employment, higher salaries and an expanded taxation base for government.

In combination with the collection of indirect taxes from related growth in consumption and Poland’s position in the EU the government budget is enjoying the benefits of a buoyant economy.Poland’s 2008 end of year budget deficit is forecast to reach 28.6 bln zloty which Gilowska was quick to stress is still high. Whether next year’s budget follows a similar downward trend, as seen so far through 2007 will of course depend on the strength of the economy, though the government’s current track record is a positive sign for things to come.