In the coming years, the government will face challenges including the continuously rising national debt, a deepening demographic crisis, a faster increase in labor costs than productivity, wage pressure, and the threat of a widening VAT gap. The Confederation of Lewiatan believes that the National Recovery Plan funds, increased investment, and stabilized inflation should help the economy, as assessed in the Multiannual Financial Plan of the State for 2024-2027 (MFPS).
Recent events in both Polish and global economies have instilled a growing sense of pragmatism in entrepreneurs, while also acclimatizing them to a permanent state of uncertainty. It could be said that economically, we are slowly returning to the pre-pandemic status quo, albeit with significantly more experience.
According to the authors of the multiannual financial plan, the future looks mostly positive across various sectors of the economy. A definite “game changer” for the upcoming programming period of the MFPS will be the funds from the National Recovery Plan, which have partly been allocated to the budget at the beginning of the year.
Economic Forecast Evaluation
According to government forecasts, 2024 is expected to bring an improvement in Poland’s economic situation, aligning with market consensus. This year is projected to be better in terms of economic growth (Finance Ministry: 3.1%), although it will still rely on unstable foundations such as consumption. There is no doubt that the spending capabilities of Poles will increase. The rise in prices this year is expected to stabilize at over 5%, nearly half of what it was in 2023.
Rapid Wage Growth
The Confederation of Lewiatan predicts that wages will grow at a double-digit rate. While the Finance Ministry’s projected increase of 11.9% drives consumption, employers face increasing wage pressure from wages rising faster than productivity. This wage growth, detached from economic realities, is partly due to another doubling of the minimum wage adjustment. Lewiatan is calling for expedited work on changing the minimum wage law, which will also implement an EU Parliament and Council directive.
Investments Could Accelerate
Thanks to the funds from the National Recovery Plan, our investments from 2025 are expected to grow dynamically. 2024 will be pivotal, marking the end of the implementation of projects co-financed by the EU in previous financial perspectives. The Finance Ministry’s forecast of a 2.9% increase in investments this year is considered a good result.
Stable Labor Market
The labor market will continue to be very stable. Despite an unfavorable macroeconomic environment, employers are generally not reducing employment. In qualitative studies, most companies indicate plans to maintain employment at the current level.
The rhetoric used in the MFPS regarding the labor market suggests that the government lacks a plan to resolve the demographic crisis. At the same time, they repeat the argumentation of previous governments about the need to support families.
Debt and State Budget Deficit
“The challenge for the government will also be the continuously increasing national debt, particularly as the current authorities continue policies of increasing social spending. On the other hand, we have huge defense expenditures, which are hard to challenge in these times,” adds Mariusz Zielonka.
According to the Finance Ministry’s forecasts, our debt-to-GDP ratio in 2026 will exceed 60%, and in earlier years, it will gradually approach this threshold. The Finance Ministry reports that the coming years will see budget cuts and reforms aimed at preventing this threshold from being exceeded. If such a scenario occurs, we will be forced to implement an austerity plan set by the European Commission.
VAT Gap and Budget Revenues
Last year saw the VAT gap increase to the level of 2017, accounting for 15.8% of all VAT revenues. Such a significant jump should be viewed as a negative signal for the sealing of the tax system, but also for the feasibility of the budget itself. In this situation (a worse starting point for 2024), it seems highly likely that the budget for the current year will not meet its targets regarding potential VAT revenues.
