The Corona Shield – Poland’s response

Last week, the Polish government announced a plan to combat the economic impact of COVID-19 pandemic. The plan, covering five areas, was prepared jointly with the National Bank of Poland (NBP) and the financial supervisory body, the KNF. The PLN 212 billion package is worth over 9% of GDP, but only PLN 66 billion will have the form of direct expenditure. There are four sources of funding: the direct expenditure; guarantees from BGK, the state development bank; deferment of personal income tax (PIT) and social security (ZUS) contributions (PLN 74 billion); and the release of banks’ liquidity made by the NBP (PLN 70 billion).

1. Employee safety net
Spending to protect the incomes of employees whose jobs have been hit by the shut-downs are worth PLN 30 billion (of which PLN 24 billion will be financed directly by the government). The most important elements in this will include direct employment subsidies (for those on reduced hours or where work has been suspended). The self-employed will also be eligible for benefit should they encounter financial problems resulting from the pandemic. The government will extend the school-break until the Easter holidays, extending the child-care allowance respectively. The PIT declaration deadline will be extended to the end of June, providing temporary liquidity of some PLN 3.0-3.5 billion to individual taxpayers. Most of these expenses will be covered using funds from the FGŚP (Fund for Guaranteed Employee Benefits). The estimated costs assume that the subsidies will cover around 20% of all employees. Consumers will also be supported; talks are being conducted with gas and electricity to postpone bills, while banks have agreed to grant credit holidays for up to six months to those who apply.

2. Financing for business
Measures in this area total PLN 73.2 billion including PLN 4.3 billion in direct government expenses this year, and further PLN 600 million next year. The rest is comprised of various guarantees (up to PLN 50 billion of de minimis guarantees from BGK covering up to 80% of a loan (up to PLN 3.5m), interest on loan subsidies, creation of restructuring fund, subsidies for freight forwarders as regards coverage of their operational-leasing payments, automatic extension of working capital loans, possibility to settle 2020 losses in corporate tax statements from 2019 (allowing firms an instant tax refund for next year, up to PLN 5m), postponement of employees’ income tax and social security advance payments for March and April into June, as well as credit holidays.

3. Healthcare
Around PLN 7.5 billion will be spent directly by the government to fight off the pandemic (PLN 6 billion on purchases of medical equipment, and funding to develop patient helplines, healthcare infrastructure and digitalisation, including the development of telemedicine.

4. More liquidity for the financial sector
A series of measures taken by the NBP’s executive board, the Monetary Policy Committee and the Financial Stability Committee, and the financial regulator KNF include:
•    An interest rate cut of 50bp (from 1.5% to 1.0%) to the reference rate and 100bp for the Lombard rate and others
•    The introduction of sovereign-bond purchases on daily auctions,

Other measures include reducing banks’ reserve requirements, loosening capital, liquidity and financial reporting requirements, which indicates less regulatory stringency in coming months for the banking sector as it supports hard-hit businesses and consumers.

5. Public Investment Programme
After the pandemic is over, the government intends to implement a PLN 30 billion fiscal stimulus to support the economic recovery. The new investments, to be managed directly by the prime minister, should include new spending on infrastructure (including local roads), schools, hospitals, energy transformation, digitalisation, environment protection, biotechnology, and pharmacy.

This week in parliament
The specific drafts of the new bills are being discussed and will be adopted this week during the Parliamentary session. The plan will constantly be evaluated, and adjusted as the pandemic evolves.

Other measures, not covered in last week’s statement, which the government intends to implement include an automated extension of work permits for immigrants, extension of medical examination results (required by the labour code for employees to work), allowing retailers to unload the goods in their stores on Sunday, as well as extension of execution and court dates.

The Polish government now has a necessary liquidity buffer for the next three months; the budget bill will need amending over the summer. A part of the government’s expenditures will be covered by funds diverted from other sources, including EU funds (€7-8bn). Some special-purpose funds will be consolidated to gather necessary liquidity. The European Commission has declared that government expenditures related to the fight against the pandemic will be excluded from its Excessive Deficit Procedure.

BPCC members response
Do you consider the Polish government has taken sufficient measures to support your business through the crisis? What more needs to be done? The BPCC will be monitoring the situation and feeding back to the government, to focus on how foreign investors in Poland are coping, and where they see the greatest macroeconomic threats. Please send your comments to michael.dembinski@bpcc.org.pl