Planned 2020 balanced budget has room for fiscal stimulation - ministry

“It needs to be stressed that Moody's, despite a negative assessment of indicated activities in the field of economic policy, does not foresee a breach of the expenditures regulation, or EU regulations in the area of excessive deficit,” the Entrepreneurship Ministry wrote in a commentary to Moody's note. Tomasz Gzell/PAP

Poland, with a balanced budget planned for 2020, has room for fiscal stimulation, the Ministry of Entrepreneurship and Technology wrote on Tuesday in response to a critical report from rating agency Moody's.

In a Tuesday note, Moody's said the economic policy of Poland's ruling Law and Justice (PiS) party and the continuation of current changes to the judicial system have a negative influence on Poland's credit profile.

The agency forecasts the 2020 general government deficit at 0.6 percent of GDP, excluding the payment of the so-called 13th retirement-pension bonus.

Moody's said that Poland's draft budget for 2020 does not contain the budgetary effects of PiS election promises such as additional pension bonuses (the 13th and the 14th retirement payments to be introduced in 2020 and 2021, respectively) and the 15 percent average annual increase of the minimum wage in the years 2020-23, which according to the agency may have negative consequences on Polish competitiveness.

"It needs to be stressed that Moody's, despite a negative assessment of indicated activities in the field of economic policy, does not foresee a breach of the expenditures regulation, or EU regulations in the area of excessive deficit," the Entrepreneurship Ministry wrote in a commentary to Moody's note.

"In the context of a worsening global situation and calls to initiate, where possible, fiscal stimulation (...) a key issue is effective use of the fiscal space by individual countries. Poland, with a planned balanced budget for 2020, has such room and even in Moody's assessment the proposed activities should not exhaust its potential," the ministry wrote.