Economic recovery must lead to budget cuts
Overview:
The Polish economy has proved more resilient than most during the global economic crisis and is also now showing concrete signs of recovery. Inflation is low and falling while the current account deficit has contracted sharply. A temporary but sharp sell-off in Polish financial assets was more the result of contagion and the ample liquidity of these markets by Eastern European standards than any particular concern about Polish economic fundamentals which remain strong. The one area that must be addressed is the fiscal deficit which has deteriorated sharply. Some loosening of fiscal policy was inevitable given the scale of the economic crisis but the Government must offer a more credible route towards fiscal consolidation if the public debt to GDP threshold is not to be breached and ERMII entry is to be accelerated.