“At the meeting, it was emphasized that fiscal policy is a strongly pro-inflationary factor in the national economy. In 2024, the public finance sector deficit increased to 6.6 percent of GDP (from 5.3 percent of GDP in 2023). In the draft budget act for 2026, the government assumed that in 2025 the deficit would increase again, to 6.9 percent GDP, which indicates further loosening of fiscal policy” – it was written.
Read also: The President of the NBP criticized the fiscal policy of Tusk's government. “Wasteful and pro-inflation”
It was noted that the last time such a high deficit rate was recorded was in 2020, when the GDP level in Poland decreased due to the COVID-19 pandemic and it was necessary to take anti-crisis measures.
“However, currently GDP growth is solid, therefore the economy does not require strong fiscal support. At the same time, the government has again revised up the debt forecast and now indicates that in 2025 the level of public debt is expected to exceed 60%. GDP, a in 2026 it is expected to reach almost 67%. GDPwhat would be the fastest increase in this measure in the recent history of Poland” — wrote in minutes.
“only a small part from the increase in national defense spending”
It was emphasized that the debt had increased in recent years resulted only in small part from the increase in national defense spending. As a result, Council members assessed that the fiscal situation was a significant risk factor for inflation growth in the future, i.e limits the space to reduce interest rates.
Some Council members emphasized that the draft budget act for 2026 was preliminary and may be changed. Taking into account inflation developments, in the opinion of the majority of Council members it became justified to adjust the level of NBP interest rates.
“The Council members emphasized that further decisions of the Council would depend on the incoming information on the outlook for inflation and economic activity. The risk factors for low inflation include the shape of fiscal policy, the revival of consumer demand and increased wage growth. The source of uncertainty is the level of administered energy prices and the development of global inflation, including due to changes in the trade policies of major economies.” — it was written.
At the same time, there was an opinion that the current level of NBP interest rates is too low.
The Council decided to reduce the NBP reference rate by 25 basis points. to the level of 4.75 percent
