(Bloomberg) -- Poland plans to reduce its budget shortfall to the European Union’s limit of 3% of gross domestic product in 2028 as it seeks to exit the bloc’s excessive deficit procedure without broader spending cuts.
The government, which faces presidential elections next year, intends to rely on robust economic growth to help reduce the fiscal deficit, which has been bloated in past years by additional social outlays and military spending in reaction to war in neighboring Ukraine.
The fiscal strategy published by the Finance Ministry on Tuesday also envisages a boost of revenues from higher excise levies on tobacco products as well as changes in corporate income taxes. Public debt is set to fall below the EU’s 60% of GDP target by 2030, it shows.
The plan reflects a deterioration in the country’s fiscal scenario, compared with the government’s projections from April, based on weaker budget performance so far in 2024. In August, the government increased this year’s budget gap to 5.7% of GDP from 5.1%, while setting next year’s shortfall at 5.5%.
The document, which still has to be assessed by the European Commission, doesn’t take into account the government’s costly pre-election promises from last year, that it has postponed, including a higher tax-free allowance and mortgage subsidies.
“Our main aim was to have such fiscal path that won’t harm the economy” Finance Minister Andrzej Domanski told reporters in Warsaw. The cabinet hasn’t given up on any of its pledges, which may be added to the fiscal plan once the budget situation improves, he said.
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