The profile of Poland's general government budget balance will be affected by the December 2013 reversal of the systemic pension reform, in particular by the transfers of assets from the second pension pillar, for the next few years. However, the country's public finances set to improve gradually in 2014-2015, according to the European Commission's spring forecasts.
It expects Poland's general government budget balance to turn into a surplus of 5.7% of GDP in 2014 under ESA95, while it is set to post a deficit of 3.6% if the assets transferred to the state coffers - estimated at around 9% of GDP - from privately-owned open pension funds (OFEs) are not treated as revenue. In the winter forecast, the Commission expected a surplus of 5.0% in 2014, or a deficit of 3.8% if OFEs are excluded from the calculation.
Apart from the reversal of the pension reform, the main measures with a positive and permanent effect on the general government balance in 2014 include changes in VAT and excise duties, a partial public wage freeze and a gradual increase in the retirement age, EC also reported. Expenditure savings will be partially offset by the costs of a legislated extension of maternity leave and other increases in social spending, it added.
However, EC stressed that due to the one-off nature of the large improvement in 2014 and assuming no additional measures are taken, Poland's general government budget balance in 2015 is expected to show a 2.9% deficit under the ESA95 rules (the same statement was delivered in the winter forecasts). Excluding the annual asset transfers linked to the reversal of the pension reform however, the 2015 deficit will appear larger, at 3.1% of GDP, it concluded.