Updated convergence programme of Poland, 2006-2009 - Main contents

EN

Official Journal of the European Union

C 72/13

On 27 February 2007 the Council examined the updated convergence programme of Poland, which covers the period 2006 to 2009.

The macroeconomic scenario underlying the programme envisages real GDP growth to have reached 5,4 % in 2006 and to broadly stabilise (around 5

% on average) over the rest of the programme period. Assessed against currently available information, this scenario appears to be based on growth assumptions which are cautious in 2007 and rather favourable thereafter as the labour market may not improve as rapidly as foreseen in the programme in particular. The programme's projections for inflation appear realistic, tilted to be on the low side towards the end of the programme horizon, notably because of rising wage pressures from the tightening labour market.

In the January 2006 convergence programme, the target for the general government balance in 2006 was set at – 2,6 % of GDP, the Commission services' autumn forecast points at – 2,2 % of GDP, while the November 2006 update of the convergence programme estimates the 2006 outturn at – 1,9 % of GDP. The better-than-expected outturn mainly results from an incomplete execution of expenditure plans (especially social transfers and public investment), while revenue increase resulted mainly from stronger-than-expected growth. The above-mentioned deficit figures exclude the pension reform cost, estimated at around 2 % of GDP in 2006, in line with the transition period for implementing the Eurostat decision of 2 March 2004 on the classification of funded pension schemes (2), which expires in spring 2007. The main goal of the budgetary strategy in the November 2006 update is to correct the excessive deficit by 2007 by qualifying for the provision of the reformed Pact which allows a part of the pension reform cost to be deducted. For the following years, the programme plans a gradual reduction of the deficit so that the 3 % of GDP reference value is reached in 2009.

The deficit is planned to narrow by 0,4 percentage point of GDP annually (0,3 percentage point if the pension reform costs are included), from 1,9 % of GDP in 2006 to 0,6 % of GDP in 2009. The primary surplus is planned to improve from 0,5 % of GDP in 2006 to 1,7 % of GDP in 2009. Including the impact of the above-mentioned Eurostat decision, the deficit in the updated programme would improve from 3,9 % of GDP in 2006 to 2,9 % in 2009. The adjustment is planned to be revenue-based in 2007 (revenue ratio increase by 0,6 percentage point of GDP with a near-constant expenditure ratio) and strongly expenditure-based in 2008-2009 so as to more than offset a large decline in the revenue ratio (average annual expenditure ratio reduction by 1,6 percentage point, especially consumption and social transfers, with the revenue ratio declining by 1,2 percentage point on average mainly reflecting a cut in social contributions, changes in personal income tax system and other changes to the tax system, which are not always fully specified). Compared with the previous programme, the deficit targets have been revised downwards in view of much stronger growth and the better-than-expected outcome in 2006.

The...