Fin. Min. to revise 2001 macro forecasts due to surprisingly high inflation

The Finance Ministry will likely amend the macroeconomic provisions of the 2001 budget draft, primarily due to the higher than expected inflation. "The rise in inflation has caught economists off-guard. The correction of budget provisions will be substantial," said Finance Ministry adviser Stanislaw Gomulka. The budget for 2000 predicted this year's inflation at 5.7%, while it now looks likely that it will exceed 10%. This forecasting error will cost next year's budget dearly in compensation to pensioners, whose benefits are adjusted according to expected inflation. Higher inflation also means higher interest rates which will increase the costs of servicing public debt. In addition, if the Monetary Policy Council (RPP) drives interest rates up in an effort to curb inflation, economic growth will suffer requiring this forecast to also be changed. (Gazeta Wyborcza, page 18)