Fiscal policy is turning strongly expansionary, as the authorities have unveiled a major fiscal stimulus package. The 500+ programme will no longer be means-tested for the first child from July 2019, pensioners will receive a one-off bonus in 2019, and there will be cuts to personal income taxes from 2020. However, one‑off revenues, notably due to changes in the pension system, will reduce the budget deficit by about one percentage point of GDP in 2020, and an increase in social security contributions will also limit the budget deficit in 2020. Even so, a tighter fiscal stance would be appropriate. Eliminating some of the reduced VAT rates that do not benefit low-income households and ending the preferential tax treatment for the self-employed would raise revenues. Implementing broad-based spending reviews and reviewing energy subsidies would help achieve budget savings. Monetary policy has been appropriately accommodative given subdued inflationary pressures. Yet, wages are projected to accelerate further, reflecting binding capacity constraints and public-sector pay rises. The central bank is assumed to initiate a tightening cycle from the summer of 2019 to counter rising inflationary pressures.
To address the decline in the working-age population, the authorities will need to increase women’s labour force participation, raise the effective retirement age and put in place policies in favour of high‑skilled immigrants. Increasing access to high-quality early childcare will facilitate combining work with family life and improve opportunities for under-privileged children. Strong immigration from neighbours in Eastern Europe is alleviating labour shortages, but putting in place comprehensive monitoring and integration policies would help Poland attract and retain skilled migrants. Stepping up efforts to inform the public about the impact of working longer on pension income would contribute to increasing the effective retirement age. Making corrections to the pension system, such as aligning male and female retirement ages and indexing them to life expectancy, would also help address demographic challenges. Participation in adult training is limited, and there is a need to boost digital skills, notably among older workers. Raising skills by promoting lifelong learning would create more learning opportunities in line with labour market needs and enhance long‑term employment prospects.
