Poland’s expansionary fiscal policy in 2025 could prompt a more stringent monetary stance, delaying interest rate cuts.
Economists at PKO BP suggest that the government’s plans for a more expansionary fiscal policy in 2025 may prompt the Monetary Policy Council (MPC) to adopt a more stringent stance. This could potentially delay discussions about reducing interest rates by the National Bank of Poland (NBP). The economists highlighted in their morning report that an unexpected expansion in fiscal measures might necessitate a tighter monetary approach to balance the economy.
Deficit and Debt Projections
The government’s budget plan, approved on Wednesday, projects a deficit of 289 billion PLN in 2025. This figure includes repayments of 34.7 billion PLN for Polish Development Fund (PFR) debt and 28.5 billion PLN for the COVID-19 Fund. Additionally, the general government deficit is expected to reach 5.5% of GDP, with public sector debt projected at 59.8% of GDP. These significant figures underscore concerns about the potential need for a tighter monetary policy to counterbalance the expansionary fiscal measures.