EBRD raises Poland's GDP growth forecast

“Amid a deteriorating external environment, domestic demand is expected to remain the key engine of growth, additionally boosted by generous government spending, starting from 2019, which is a double election year in Poland (EU and general elections),” the May report read. Darek Delmanowicz/PAP

The European Bank for Reconstruction and Development (EBRD) has raised Poland's GDP growth forecast for 2019 to 4.1 pct year on year, up by 0.5 pct., the bank said in a recent report.

At the same time, the bank estimates Poland's annual growth in 2020 at 3.6 percent, the report showed.

“Amid a deteriorating external environment, domestic demand is expected to remain the key engine of growth, additionally boosted by generous government spending, starting from 2019, which is a double election year in Poland (EU and general elections),” the May report read.

According to the EBRD, the ruling Law and Justice party's 'PiS Five' social reform package (which includes expansion of child subsidies, a one-off pension payout, liquidation of PIT for those under 26 years of age, and an increase in the tax-free allowance) "uses up much of whatever fiscal space was left, constituting a permanent upward shift in the structural budget deficit."

Both the national expenditure rule and the EU Stability and Growth Pact will be exceedingly difficult to meet already in 2019, the EBRD said.

Representatives of the government, after presenting the PiS Five fiscal package, have repeatedly argued that national and EU fiscal rules will not be broken.