Poland economy briefing: "New Polish Order" - pandemic recovery program plans
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
ISSN: 2560-1601
Vol. 38, No. 2 (PL)
March 2021
Poland economy briefing:
“New Polish Order” - pandemic recovery program plans
Joanna Ciesielska-Klikowska
1052 Budapest Petőfi Sándor utca 11.
+36 1 5858 690
Kiadó: Kína-KKE Intézet Nonprofit Kft.
office@china-cee.eu
Szerkesztésért felelős személy: Chen Xin
Kiadásért felelős személy: Huang Ping china-cee.eu
2017/01“New Polish Order” - pandemic recovery program plans
In last weeks, the Prime Minister of Poland announced a “New Polish Order”, a recovery
program based on financial support from the European Union. This program is a form of the
national pandemic reconstruction plan, designed to facilitate the use of Brussels’ structural
funds. The stakes are high, over PLN 250 billion. Today, the concrete solutions of the project
are still shrouded in mystery, but some ideas already ignite discussion among the public.
At the beginning of January, Prime Minister Mateusz Morawiecki announced that his
government is working on a new document, called a “New Polish Order”. As he described, this
was supposed to be a proposal for the time after the pandemic, in which new investment plans
and “proposals relating to many areas of social and economic life” would be presented.
However, the Prime Minister was initially quite frugal in words: “first, let’s fight the pandemic
– this should last next four, five months. Then I hope for a strong economic rebound”. The
government spokesman also did not want to reveal more about the program. In a radio interview
at the beginning of February Piotr Mueller said that the “New Polish Deal” will be “an
extensive economic and investment program, which is to bring results over the next few years,
in the new reality after the pandemic”.
In late February, however, the draft plan was released. Without a big pump but with
significant media interest, PM Morawiecki announced the plan’s assumptions on February 26,
2021. PM’s speech and the speeches of selected members of the government inaugurated the
consultation process of the “New Polish Deal” with the business community. The final
presentation of the program is to take place on March 20. It is already known that the plan
provides for revolutionary, as for Polish conditions, changes, namely:
1. increase of the tax-free amount up to PLN 30,000 (EUR 6,660); currently, the tax-free
amount is 1/10 of the proposed sum (specifically PLN 3,091 for people earning from
up to PLN 85,528);
2. introduction of a free-tax pension - pensions up to 2.500 PLN (EUR 555), which are in
fact majority of all pensions paid in Poland, are to be tax-free;
3. increase of the health contribution “for the highest earners” - in this way, the
government wants to increase spending on health care to the level of 7% of GDP
annually. In 2021, the spending on national health service is expected to reach 5.3%.
1Financial basis for the program
The financial assumptions are attractive, but where to get the money for them? The
answers are in Brussels. The national reconstruction plan, called the “New Polish Order”, is the
basis for reaching for money from the EU’s Recovery and Resilience Facility, the most
significant part of the Reconstruction Fund of the European Union. In turn, the Reconstruction
Fund (called “Next Generation EU”) is the Community’s response to new threats and
challenges caused by the COVID-19 pandemic. It was adopted together with the EU’s
multiannual financial framework for 2021-2027. The budget of the Reconstruction Fund is over
EUR 672 billion. Within its framework, Poland as an EU Member State, will have at its disposal
app. EUR 57.3 billion (app. PLN 258 billion), including EUR 23.1 billion (PLN 104 billion) in
the form of subsidies and EUR 34.2 billion (PLN 154 billion) in loans. The time to use the
funds will last until 2026.
Notably, according to the European Commission’s guidelines, each country in its plans
must assume that at least 37% of EU support will go to the fight against climate change and
20% to digital transformation. Therefore, the Polish government indicates that the money from
the reconstruction plan will be spent on innovation, health protection, green energy,
digitization, protection of climate, clean air and infrastructure investments (expansion of the
rail and road network).
Deputy Prime Minister and head of the Ministry of Development, Labour and
Technology, Jarosław Gowin, praised the funding amount. In an interview with Polish Press
Agency PAP, Gowin announced that the non-repayable subsidies that Poland will receive from
the European Reconstruction and Resilience Fund “will be an important injection for the
development of the Polish economy in the coming years”.
The Ministry of Funds and Regional Policy also looks forward to implementing the
program as soon as possible. Ministry officials emphasize that currently, “work on the
reconstruction plan is advanced and the Ministry is in constant contact with the European
Commission, which means that a large part of Polish proposals on how to use the money is
already discussed.” Ministry hopes to clear up all doubts with the EC before the formal
possibility of submitting documents (end of April 2021).
2Criticism of the plan
By now, opposition politicians and analytical centres indicate that the “New Polish Deal”
will be “largely and nicely wrapped” national reconstruction plan, which the government is
preparing for Brussels, just to gain financial support. The opposition parties point out that a few
years ago, when Mateusz Morawiecki was the Minister of Development and Finance, he had
already created a development plan called “Strategy for Responsible Development” (alias
“Morawiecki’s Plan”). The opposition fears that this “New Polish Deal” will be just as misfire
as the plan before. At the same time, the opposition indicates that current Morawiecki’s ideas
look like taking political fuel from political opponents because most of the projected outcomes
contained in the program have been essential postulates of the opposition in recent years, i.e
high tax-free amount was proposed by MPs from Kukiz’15, the Confederation, and Civic
Platform. In the case of a tax-free pension, it is a clear reference to the ideas of the Polish
People’s Party.
Report of the Civic Institute, which is the think tank supported by the Civic Platform,
does not leave a thread on Morawiecki’s projects. The analysts indicate that “in 2016-2019, the
Law and Justice government did not take advantage of the opportunities in economic policy
resulting from the significant improvement in the global economic situation”. Indeed, out of
more than 70 specific objectives listed in “Strategy for Responsible Development”, only 6 have
been achieved.
Undoubtedly, the issue of increasing investments looks pale. According to the
“Morawiecki’s Plan”, already in 2020 the investments were supposed to constitute 25% of
Polish GDP. However, quite the opposite happened - now Poland is dealing with a collapse in
investments. They did not reach the assumed ratio but even fell in the last years from 20,1% in
2015 to 18,6% in 2019, and are definitely below the EU average (21.2%). On the other hand, it
should be remembered that, in particular, the last year of the pandemic was challenging for the
economy - meanwhile, the Polish economy did relatively well, maintaining a reasonably good
growth rate and low unemployment.
Yet, the “New Polish Order” has a much better chance of success than previous “Strategy
for Responsible Development”. Taking into account only Euros from the EU Reconstruction
Fund (and Polish government has announced that it will add domestic funds to it as well), the
program of spending the money will be the most ambitious economic plan in the history of
Poland after 1989. In order to be able to implement it in the best possible way, extensive
consultations on its agenda, dates and planned investments are necessary.
3According to DNB Bank Polska and Deloitte’s simulations, the most significant effect of
the reconstruction plan measured by GDP growth in Poland will occur in 2022 and 2023. It
should amount to PLN 66.7 billion and PLN 61 billion, respectively (EUR 14.8 and EUR 13.5).
Throughout the period covered by the simulation (2021-2029), the sum of GDP increases
should amount to PLN 283.9 billion (EUR 63 billion). The report entitled “Directions 2021.
The New Marshall Plan. Rebuilding the Polish economy after COVID-19” indicates that the
anti-crisis package can be indeed compared to the Marshall Plan from the period just after the
Second World War.
Conclusions
The Polish government is getting ready to publish the “New Polish Deal”, i.e. a strategy
for the new times when Poland will start to recover from the pandemic and enter the new reality
era. However, it will be a mega-strategy, as it will combine tasks concerning various aspects of
reality in several areas - from health care to tax-free pensions. The assumption is good, but
economists point out that perhaps the government wants to take too many rabbits out of one
hat.
It can be assumed that the secrets related to the project - what specific ideas the “New
Polish Deal” will ultimately contain? - are in fact the fuel for the Law and Justice authorities
that are losing energy and social support. It can be assumed that the atmosphere of secrecy
around the plan’s assumptions is a kind of a PR manoeuvre or a purely political play to attract
the attention of large masses of the electorate.
At the same time, the guarantor of implementing the plan, even if not everything is
successfully realised, is the European Union, which will finance the economic changes. For
Poland, this can be a genuinely civilizational leap and a tremendous generational opportunity.
4You can also read
