2020-03-12
FOR Communication 6/2020: Public Finances Not Prepared for Coronavirus
Summary:
- The Law and Justice government wasted the 5 years of prosperity, as a result of which the Polish public finances and the health care system are not prepared for the coronavirus epidemic. A "Balanced budget" is an accounting trick, serving the government's propaganda - in fact, the planned deficit of the public finance sector, after deducting one-off revenues, was to reach 2.2% of GDP in 2020 (over PLN 50 billion), which is just under 2.6% of GDP recorded in 2015. At the same time 13 EU countries were planning to achieve surpluses. Additionally, no major reform to increase the efficiency of the health service has been carried out, focusing primarily on increasing social transfers.
- In a situation of growing uncertainty about the possible consequences of the coronavirus epidemic, it is even more urgent than before to reduce the uncertainty generated by the rapid legislative changes introduced by the current government. The right direction is the appeal of Polish entrepreneurs to conclude a social pact under the slogan "2020 - the year of regulatory peace", the most important point of which is to postpone the entry into force of new administrative obligations for companies. The additional strengthening of such a pact should be an unambiguous declaration of the government not to introduce new taxes and other levies in 2020.
- Until the situation calms down and the spread of the coronavirus is contained, we also propose that no legislative changes are made in the coming months that are not directly related to the response to the epidemiological threat and the effects the epidemic may have on society and the economy, except in urgent cases.
- All activities that deepen the chaos in the justice system and undermine the rule of law should be halted.
- In a situation of growing epidemic risk, any administrative obligations imposed on businesses and, more broadly, on citizens need to be reviewed. It may be appropriate to postpone some of them or limit the sanctions for non-compliance.
- At this time it is too early to decide on the possible extent of support for particular industries or entities, but the government should develop potential tools to maintain liquidity for companies and sectors particularly affected by the epidemic. At the same time, it should be stressed that the coronavirus must not be a pretext for further circumvention of the existing fiscal rules, which would threaten to deepen the structural problems of the Polish public finances and uncertainty.
Author:
Aleksander Łaszek, Phd, Chief Economist
aleksander.laszek@for.org.pl
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