July 22, 2020 / 9:26 AM / 13 days ago

Poland comfortable with EU's 2020 deficit forecast of 9.5%/GDP

WARSAW (Reuters) - Poland’s government is comfortable with an EU forecast of 9.5% of GDP for this year’s general government deficit, the finance ministry’s chief economist Lukasz Czernicki said on Wednesday.

The government’s existing forecast was 8.4%, up from last year’s 0.7% due primarily to state support for local companies hit by the coronavirus.

Those funds have come mostly via debt issues by two state agencies, the PFR fund and BGK bank, expected to total almost 100 billion zloty (20.53 billion pounds) each this year.

Piotr Poplawski, senior economist at ING Bank in Warsaw, estimated that, including those funds, the deficit would hit 10% of economic output, higher than the EU average.

Finance Minister Tadeusz Koscinski told reporters the deficit excluding the funds would amount to around 100 billion zloty.

Before economic fallout caused by the pandemic made previous fiscal plans unrealistic, the government had planned a deficit-free budget for 2020.

Koscinski said he expected the economy to shrink around 4.5-4.6% this year.

Next year the economy will get a first boost from the European Union, estimated at 160 billion euros, from the recovery fund that leaders reached a deal on on Tuesday, he said.

Reporting by Anna Koper and Marcin Goclowski; editing by John Stonestreet

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