WARSAW: Poland will double its dividend income from state-controlled companies next year, but a lower economic growth projection means it will still struggle to fill a budget hole, according to a redrafted 2012 budget endorsed by the government on Tuesday.
After winning a second term in office in October, Prime Minister Donald Tusk has admitted the government will have to plan for much lower growth next year of 2.5 percent, versus the 4 percent projected in the original 2012 budget.
Warsaw targets a 2012 central budget deficit of 35 billion zlotys ($10.5 billion), according to the new budget draft, with spending at nearly 329 billion zlotys and revenues at some 294 billion. It now estimates dividend revenues of 8.2 billion zlotys, double the amount projected in the previous budget draft adopted in the summer.
"This budget is radically responsible when it comes to public finances and, at the same time it will protect people from excessively painful effects of the crisis," Tusk told a news conference.
"Together with Finance Minister Jacek Rostowski we adopted a rule that crisis is not the time for revolutionary steps, but it is time to undertake responsible measures to help the people go through it," he said.
Presenting his new government's programme for another four years in office last month, Tusk had said that Warsaw would raise the retirement age, disability contributions and the mining tax and curb tax breaks to help shield the European Union's largest ex-communist economy from the euro zone's spiralling debt crisis.
On Tuesday, Tusk said his centrist cabinet would approve by the end of January all the necessary legislation to enact these reforms and ensure Poland's general government deficit falls below the EU ceiling of 3 percent of GDP in 2012 from 5.6 percent seen this year.
"Even assuming 2.8 percent growth next year we find it difficult to see the budget deficit much below 3.5 percent of GDP," said Peter Attard Montalto, an economist at Nomura. "We still need a lot more detail beyond the big Tusk speech about exactly how they are going to reach this number (below 3 percent in 2012)."
Poland's new debt strategy, also approved on Tuesday, sees public debt at 56 percent of GDP in 2012 from a previous estimate of 55.2 percent and falling to 50.2 percent in 2015 from 56.7 percent in 2011, under the EU methodology.
Poland owns significant stakes in companies such as Europe's second largest copper producer KGHM, utility PGE, gas monopoly PGNiG and bank PKO BP , which usually provide the bulk of the state's dividend income.
Poland was the only EU member to have avoided a recession since the global economic crisis escalated in 2008.
But the zloty has taken a beating lately, losing 10 percent against the common currency since the start of June, as investors fled emerging assets on rising risk aversion triggered by the deepening euro zone debt crisis.
Poland's new budget assumes an average zloty rate of 4.17 to the euro next year. It was trading at 4.48 to the euro on Tuesday afternoon after weakening 0.7 percent on the day.
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