RPP slams 2001 budget

The budget has been a major topic of conversation, not all of it good.
By : Bogda Zukowska

   The Monetary Policy Council (RPP) gave a resounding thumbs down to the Finance Ministry’s 2001 budget proposal last week. The RPP’s statement, published on the National Bank of Poland's (NBP) Web site, said the ministry’s forecast of 5.2% economic growth for next year was “too optimistic.”

   RPP member Grzegorz Wójtowicz said the council had focused on analyzing a number of gray areas in the budget draft. “After summing up all the unsettled questions, we came out with the opinion we issued,” he said.

   The council itself cut back its forecast to 4.5% from 5.1% due to sluggish growth in the economies of Poland’s trading partners. However, inflation forecasts for 2001 are expected to remain around the 6-8% range, according to the RPP and the Finance Ministry.

   Initial reactions to the RPP’s statement varied. The financial markets largely ignored the RPP, which caused little problems with zloty exchange rates. Meanwhile, the Finance Ministry refused to comment.

   Analysts waiting for a signal from the council, particularly concerning possible interest rate cuts, were disappointed. “It lacked a concrete opinion, if the budget is good or bad,” said Monika Kubik-Kwiatkowska from Standard&Poor’s. Miros3aw Gronicki, chief economist in BIG Bank Gdanski said the council had missed the point, “focusing on details, but overlooking the major problem, which is the surge of budgetary spending, planned at 42.6% of GDP, the highest level since 1995”.

   Dariusz Rosati, an RPP member, admitted that the council had not been able to fully evaluate next year’s fiscal policy. In its document, the council simply said that “tight fiscal policy is needed.”

   But the RPP said the finance ministry should have an additional z3. 7 billion from the UMTS license sell off. The money from the UMTS deal should help reduce public debt, the RPP said.