Shortly after Poland’s parliamentary elections, held on 15 October, eleven international chambers of commerce including the BPCC organised a joint breakfast at which two Polish experts presented their outlook for a future government.
Dr Małgorzata Bonikowska, from the Centre for International Relations and Dr Sławomir Dudek, from the Institute of Public Finance, presented their analysis of the current political and economic situation, and took part in a discussion moderated by Bogusław Chrabota, from the daily newspaper Rzeczpospolita.
Dr Bonikowska said that the road ahead is not without potholes; the new government will be able to access EU funds without the President Duda’s agreement as ministers can modify the application to avoid a veto. However quickly or slowly a new government is formed, it will have to act quickly, as a plan is required by the year end, and the 2021 -2027 budget is already late. Issues such as rule of law, anti-LGTB zones and restrictions on on-shore wind arm locations have blocked EU funds. Dr Bonikowska mentionted next year’s EU Parliamentary elections and Ukraine’s accession talks. An EU migration pact should be agreed before June, she said. Looking at regional politics, she said that the Visegrad Four no longer functions, but that the Three Seas initiative, promoted by PiS, is supported by the US. The Weimar Triangle can help Poland become a bridge for Germany, Poland, Ukraine and France. Poland will hold presidential elections in 2025, and President Duda will still be able to influence EU positions. Dr Bonikowska also highlighted the fact that Poland’s imports from China are worth 13 times more than its exports there.
Dr Dudek began by pointing out that Poland is currently in a recession, and that economically, there is much uncertainty. Germany’s performance will impact Poland’s economy. Unemployment remains low, the second lowest in the EU. Inflation has dropped from a peak of 18.8% to the current level (6.5% in October), but because of the pre-election fuel-price manipulation, we can expect an increase. Other state-controlled sectors like the railways and motorways can expect increases too, so inflation is likely to increase in 2024, he said. Interest rates are anticipated to remain the same. Officially, the budget deficit is 90 billion złotys, however according to Eurostat the real figure is almost double what the government claims, and stands at 170 billion złotys. It is worth mentioning that Poland’s supreme audit chamber, NIK, did not approve the official government figures. Dr Dudek said that opposition election spending promises ranged from 120 billion złotys to 200 billion złotys, and this will need to be addressed at some point. Poland is currently servicing the second-highest debt in the EU, second only to Hungary.
From January 2024 the new government will return to a greater measure of public-finance discipline, adherence to the rule of law, thus enabling EU funds to be released. The new government will create a climate of stability and ensure that audits are transparent. NIK found many discrepancies of its audits of public-sector bodies, with 100 cases referred to the prosecutor Ziobro, who ignored these complaints. There has been a major lack of trust in the PIS government by EU institutions. There were 250 milestones to be achieved in order to release EU funds. Many have been met, but the chief stumbling block remains the judiciary. The EU trusts Tusk, and even if corrective action is not immediate, trust in the leadership will deliver results. There is no discussion regarding revenge but laws will still need a parliamentary majority to be passed. The roles of Minister of Justice and the prosecutor will certainly be split.
The new government cares about business, but energy prices are certain to rise. Renewables will be high on the agenda. There are three atomic energy projects in the pipeline, however the first won’t be ready until 2035. Businesses can anticipate a 25-30% increase in the cost of energy in 2024 for businesses.
Regarding Ukraine, Poland can play a major role in its reconstruction, but will not be a financial donor. Relations with the G7 and EU are key factors. Unlike Poland, Korean and Japanese businesses don’t have experience working with Ukraine.
The picture is not completely negative – public finances are not in ruin. There is work to be done but the road ahead can be navigated with the right people driving change.