Thanks to the government-proposed changes to the open pension fund (OFE) system, Poland will be able to report a one-time surplus in the general government sector - of 4.6% of GDP in 2014, according to forecasts of the European Commission. However, this year, the gap will rise to 4.8% of GDP from 3.9% in 2012 and in 2015, it will again be negative at -3.3% of GDP due to the one off nature of the large improvement in 2014.
EC expects the deficit to increase to 4.8% of GDP in 2013 due to a revenue shortage, mainly as a result of declining indirect and direct tax revenues. In August, the authorities amended the 2013 state budget, which included expenditure cuts of 0.5% of GDP. However, the Commission notes that general government expenditure in 2013 is set to fall only slightly compared to its spring forecast, with an increase in current expenditures partially offsetting a fall in capital expenditures.
In 2014 and 2015, the fiscal strategy is largely based on the planned changes to the open pension fund (OFE) system. In 2014, EC projects the general government balance to turn into a surplus of 4.6%. This is mainly due to a one off transfer of assets from the second pillar of the pension system (8.5% GDP), which under the rules in force until next year (ESA-95) is treated as revenue, the Commission explains.
In October, the ministry of finance said that Poland will be able to report a one-time surplus in the general government sector - of 4.5% of GDP in 2014 thanks to OFE changes. However, the ministry admitted that we will return to a deficit of 3.0% of GDP the following year.
The draft law amendment stipulates for writing off of T-bonds held by OFEs (i.e. 51.5% of their portfolio) on Feb 3 of 2014. Afterwards, the funds will be allowed to invest in, among others, equities, corporate and municipal bonds, mortgage bonds, revenue bonds, derivatives. The ministry of finance estimates that the value of bonds to be written off will amount to around PLN 120bn.
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