IMF mission ends – good prospects for Poland

International Monetary Fund's staff visited Poland in order to assess the current economic situation of the country. Presented results were very positive – the IMF forecasts that the Polish GDP growth will reach 2.7% in 2014, next to a decrease of the general government deficit to 3.5%.

- Better forecasts for the growth of our economy by organisations such as the IMF is a very positive signal – said Prime Minister Jacek Rostowski. – The IMF expects our economy to reach growth at the level of 2.7% next year, but this could be just the beginning of the improvement. The concluding IMF statement says that our economic policy is nearly ideal" – he highlighted.

International Monetary Fund's staff visited Poland in the week of November 15 to 22. In their concluding statement issued on November 22 Fund experts noted that economic activity in Poland is starting to strengthen after a cyclical downturn. With continued recovery they expect moderate continuation of fiscal consolidation in order to put the public debt ratio firmly on a downward path. In this context they also see a supportive role of the monetary policy. According to the Fund recovery is underway and is expected to continue in 2014, driven by domestic demand. IMF forecasts 1.3 percent growth this year and 2.7 percent in 2014. Possible turbulence in global financial markets or a prolonged period of slower growth in Europe could harm Poland's growth prospects yet the Flexible Credit Line arrangement with the IMF provides insurance against these risks.

Fund staff sees the positive effects of the proposed changes to the pension system through improvement of the fiscal aggregates, yet they underline the need for further reform of the social security system. This concerns the special occupational pensions and disability and survivor pensions. IMF expects the general government deficit to reach 4.6 percent of GDP in 2013 and 3.5 percent in 2014 . Fund underlines the importance of continued containment of expenditures, avoidance of cuts to public investment and possible measures to strengthen tax administration. IMF also expects the proposed fiscal rule—with reductions in the debt thresholds to reflect the pension changes —to help support this objective. Together it should help the authorities in approaching the Medium-Term Objective of a 1 percent of GDP structural deficit by 2016.

Fund sees the resilience of the financial sector even in the face of weak growth. IMF notes the need to address impaired loans and boost oversight of bank credit risk management policies. Fund urges progress in passing the legislation on macroprudential and bank resolution frameworks, as these are essential tools for crisis prevention and resolution and would also complement initiatives at the EU level. Fund also noted some weaknesses in the credit union sector and called on the supervisory authority (KNF) to continue to require credit unions with weak financial conditions to adopt rehabilitation plans.