Poland lowers growth forecast in 2012 budget

AP News

12/6/2011 11:17:57 AM - AP News

Polish leaders unveiled a 2012 budget on Tuesday that lowers earlier predictions of economic growth _ an acknowledgment that Europe's debt crisis is impacting the country.

The budget, which also aims to lower the country's deficit, assumes 2.5 percent growth. A plan announced in September had assumed 4 percent growth and was criticized by some economists as overly optimistic.

Prime Minister Donald Tusk and Finance Minister Jacek Rostowski announced the budget at a news conference in Warsaw after the center-right Cabinet approved it. It foresees expenditures of nearly 329 billion zlotys ($99 billion) and revenue of 294 billion zloty ($88 billion). The deficit would be 35 billion zlotys ($10.5 billion; euro7.8 billion).

Tusk called it an "extremely responsible" budget lacking any radical features.

"A crisis isn't a good time for revolution," Tusk said. "A crisis is a time for responsible activity that will help people survive the crisis."

Poland, the largest of the European Union's eastern members, has shown remarkable resilience to the global financial turmoil. It was the only EU state to avoid recession during the downturn of 2008-2009, and its economy is on pace to grow 4 percent this year.

Even through September growth has been impressive.

Third quarter growth was 4.2 percent year-on-year, according to government data announced last week. That was slightly slower than the 4.3 percent registered the previous quarter, but was still better than some economists had expected.

The economy has been buoyed by strong private consumption, a boom in investment by companies and a weakening of the currency _ the zloty _ which has made Polish exports cheaper in foreign markets.

However, economists warn that the country will eventually be impacted by the current crisis in the eurozone as its exports to neighbors are hurt, and because foreign investors are losing confidence in many emerging markets, including Poland's.

As its struggles not to become another nation with a debt crisis, Warsaw is aiming to reduce its budget deficit to the EU's limit of 3 percent of GDP. It was nearly 8 percent last year and is projected at nearly 5.6 percent this year.

To that end, Tusk announced a far-reaching set of austerity measures last month that include some tax increases and an eventual rise in the retirement age to 67 for men and women. Currently men can retire at 65 and women at 60.

The budget plan must still go to parliament, where it will likely be amended.