Poland gearing for the euro plans significant cut in state deficit in 2009

The government plans to cut Poland's budget deficit drastically next year as the country prepares to adopt the euro currency, the finance minister said Tuesday.

Finance Minister Jacek Rostowski did not say exactly how the government would manage to shrink the deficit, saying only that it was possible thanks to budgetary reforms and despite plans to lower income taxes.

The government, which is still working on the draft 2009 budget, foresees a deficit of 18.2 billion zlotys (US$8.2 billion; €5.3 billion), down from this year's predicted deficit of 27 billion (US$12 billion; €8 billion), Rostowski said.

Also, in line with EU requirements, the government is planning to further limit budget deficit by 0.5 percent of GDP each year and go well below the required 3 percent of GDP in 2011, Rostowski said.

The preliminary budget provisions also plan for a total of 328.7 billion zlotys (US$149 billion;€96 billion) in government spending. This year the government budgeted 339 billion zlotys (US$154 billion;€100 billion) for spending.
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It will be the lowest deficit planned since 2000, Rostowski said. "This is proof how far we have advanced on reforming public finances."

Poland also plans to lower private income tax next year, which will decrease state revenues by some 7 billion zlotys (US$3 billion; €2 billion). The current 19, 30 and 40 percent tax levels will be scaled down to 18 and 30 percent levels. Rostowski did not have detailed figures on expected budget income from tax.

He also predicted 5 percent GDP growth in 2009, compared with expected 5.5 percent this year and inflation of 2.9 percent — within the euro zone regulations that set the ceiling at 3 percent.

A former communist nation, Poland joined the European Union in 2004 but has yet to set a date for adopting the EU common currency.
Source:iht.com