RPP member Grabowski estimates next year's deficit at over 5% of GDP

Poland's broad public sector deficit could balloon to 5% or more of GDP next year if privatization proceeds fall short of the target, a senior banker warned yesterday. Monetary Policy Council (RPP) member Boguslaw Grabowski said spending restraints and strong privatization revenues were vital to stave off a deterioration in the fiscal position, which if unchecked could spell economic disaster for Poland. "I cannot see the economic deficit below 5% of GDP in 2002," Grabowski said. "It can easily exceed 6%, if privatization revenues will fail to materialize." Income from the sale of State assets is budgeted at zl.18 billion this year and set to fall next year. Grabowski also mentioned that the consequences of the deficit would create pressure in areas where Poland is already in economic difficulties, including the current account deficit, interest rates, a weakened zloty, high unemployment, and loan problems. Even more pessimistic is Janusz Jankowiak, an economist with BRE Bank, who says the deficit has the potential to reach 10% of GDP, unless radical budget cuts are introduced. Arkadiusz Krzesniak, an economist with Deutsche Bank Poland, is more optimistic about the economic situation, but still predicts the deficit at 5% of GDP. "So far there is no data that can suggest a financial catastrophe," Krzesniak said. (Parkiet, pp. 1, 6; Reuters) R.P.