Gov't budget no boon to business

The government's 2002 budget will not jump-start the economy this year because its primary aim is to prevent a financial meltdown, local economists said Friday before Parliament was expected to pass the legislation. "We shouldn't look at it as a stimulus for the economy," said Marcin Mróz, senior economist at Société Générale Bank in Warsaw. "It's not this kind of budget but a kind of austerity package to prevent the economy from going straight into a crisis." The major problem, Mróz said, was the country's huge budget deficit. Ministers set the deficit for 2002 at zł. 40 billion ($9.75 billion) or 5.2% of gross domestic product. The figure is zł. 7 million ($1.7 million) more than last year's zł. 33 billion ($8 billion) or 4.5% of GDP. The budget draft placed government expenditures at nearly zł. 184 billion ($44.8 billion) and revenue at about zł. 144 billion ($35 billion), although these amounts could be changed later by parliamentarians, according to the law. It also put average annual inflation at 4.5%. A local news report last week said that the Sejm added 112 changes to the budget act during its second of three readings. Once passed by the lower house, the budget draft moves to the Senate. The deadline for the budget's final approval is March 23. "I don't expect this budget to give a lot of fuel to the economy," said Katarzyna Zajdel-Kurowska, the head of treasury research at Bank Handlowy. She pointed out that with the weak economy, the government was forced to cut expenditures on investments and social support as well as freeze salaries for certain public sector employees, such as teachers. These measures would in turn hamper disposable income and decrease consumer spending. New tax proposals, such as creating a 20% tax on income earned from savings, would further limit disposable income, she said. "(The budget) already takes a lot of steps to cut these (expenditures), but not enough," said Jacek Wiśniewski, the head of treasury research at Bank Pekao. He noted that several amendments reduced some public expenditures, such as decreasing maternity leave payments, but did not go far enough, especially since the government must continue to spend a chunk of money on costly social security and pension payments. "Generally our social security system is too big and there are too many people it has to cover, especially with the growth of the pension system and many people not being forced to work," Wiśniewski said.