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IMF projects year-average GDP growth for Poland at 5.5% for 2004, 4.75% for 2005
Economic growth in Poland, at an expected year-average of 5.5% in 2004, was stronger in the last six months than expected in April by the International Monetary Fund (IMF) as price shocks were addressed, fiscal reforms undertaken and as further privatization is spear-headed by the upcoming sale in November of a 30% stake of PKO BP, Poland's largest retail bank.
The IMF's projects year-average economic growth in Poland of 5.5% for 2004 and of 4.75% for 2005.
"The projections do not reflect slower economic growth at the turn of 2004 and 2005," IMF European Department Deputy Director Susan Schadler told a news conference on Wednesday. "The lower projection for 2005 is the result of uneven bunching of economic growth impulses in early 2004," she added.
In April, the IMF expected Poland's full-year 2004 gross domestic product (GDP) growth to hit 4.5-5.0% if political and fiscal instability did not scare off corporate investors. The April report came just before former Prime Minister Leszek Miller and his Cabinet stepped down on May 2 amid record-low voter support.
The Polish government that stepped in once Miller's Cabinet resigned is led by former Finance Minister Marek Belka. Belka and his Cabinet won on Friday, October 8 their second confidence vote in Parliament, enabling them to govern for another eight months, or until a probable general election in May 2005.
On the fiscal side, the IMF urges Poland "to make forceful fiscal adjustment in the current cyclical upturn in the country's economy" to pre-empt a situation of increased public debt when economic growth slows down, as witnessed in 2001-2003 after rapid growth in the late 1990s, which was not accompanied by sufficient fiscal reform.
The government's belt-tightening program, dubbed the Hausner plan, an omnibus package of legislation authored by Economy and Labor Minister Jerzy Hausner, is a welcome start to Poland's fiscal-reform processes. However, Poland still has a long way to go implement all necessary fiscal reforms, Schadler said.
Lower borrowing needs within the Hausner plan come on a mixture of social and administrative spending cuts and revenue increases. Earlier in October, Poland's government scaled back its projected savings from fiscal reforms to a cumulative 50.8 billion zlotys between 2004 and 2007, from the originally planned PLN 54.5 billion. The plan is to lower borrowing needs by a total 5% of GDP through 2007, down 0.4 percentage points from the government's original plan.
Poland's social transfers are still poorly directed and the health service has not been prepared to face the additional health-care services that will be demanded by an aging population, Schadler said. Also, a large tax wedge is preventing the creation of new jobs, when high unemployment continues to be a huge weak spot in Poland's economic progress.
"Poland's labor market needs critical reform and the government needs to take urgent action to increase the flexibility of the workforce, improve its mobility and reduce that tax wedge," the IMF director said. The unemployment rate in Poland in August measured 19.1%.
Nevertheless, the Polish labor market has "bright perspectives for reducing unemployment," Schadler added on a positive note.
The IMF takes a biannual look at the Polish economy and reports its findings in the spring and autumn.
(Source: http://www.interfax.com/com?item=Pol&pg=0&id=5763845&req=) |
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