Poland's deficit to drop to zł.18 billion

The Polish government approved on Tuesday a draft of the 2009 budget, slashing deficit and increasing spending on education, army and infrastructure.

The draft cuts the nominal deficit from this year's planned zł.27.1 billion to zł.18.2 billion. It also forecasts next year's annual average inflation at 2.9 percent and economic growth at 4.8 percent, from this year's 5.5 percent.

Meanwhile, the budget tackles key areas in the Polish economy, which include wage hikes for teachers, soldiers and police. The plan foresees that by the end of 2009, the unemployment rate will reach 8.5 percent.

"Roads, education and learning, these are three priorities which will build the foundation for the growth of Poland. They create infrastructure and personal growth," said Prime Minister Donald Tusk calling this the budget of priorities.

Finance Minister Jacek Rostowski said that the finance ministry is confident that the economy will expend by 5.5 percent annually, despite slower world growth. He added that the budget was constructed in tough conditions when there is a rise in expenses and an economic slowdown. "Deficit will fall in 2009 and we will be able to approach this tough task responsibly," he said at a press conference.

Prime Minister Donald Tusk will meet with members of the central bank's Monetary Policy Council (MPC) next Tuesday to discuss the budget. The initiative came as a way to discuss ways of fighting inflation, which has accelerated and peaked at around 5 percent last month. "We already think this is ambitious budget. We want people in Poland to be rich and not poor," said Tusk to reporters.

Analysts have voiced concerns that a growth target of 4.8 percent is too optimistic, an opinion also shared by MPC member Halina Wasilewska-Trenkner who calls the budget draft ambitious. "It [the budget] will be very difficult to execute, but it is still possible," she told TVP Info in an interview.

The government is expected to approve the budget draft at its regular sitting on Tuesday.