Poland's 2027 Budget Lacks Consolidation Steps, Fiscal Watchdog Warns

Poland's draft budget for 2027 contains no measures to consolidate public finances, and the danger of public debt rising above 55% of gross domestic product is very high, the country's independent Fiscal Council said in an opinion published on Monday.

The council found that the 55% threshold is breached in nearly every risk scenario it examined, leaving the plan without an adequate safety margin. While the constitutional ceiling of 60% of GDP is not expected to be crossed in 2027, the council rated the risk of breaching it as high for 2028 and very high for 2029 and 2030.

Under the government's projections, Poland's general government deficit is set to stay at 7.1% of GDP in 2027, the same level planned for this year, driven by record deliveries of military equipment. The budget deficit for 2027 is put at 286.6 billion zlotys, or about $76.57 billion, with total expenditures projected at 977.6 billion zlotys.

Warsaw has maintained that the large shortfall stems from record defence spending, which is due to reach 198 billion zlotys next year, or more than 4.5% of GDP.

The Fiscal Council, however, said defence is not the sole cause of the deterioration in public finances. It accounts for roughly one-quarter of the rise in expenditure since 2021, while social transfers, wages and other permanent state obligations also play a significant role, the council said.

The council added that the expenditure forecast carries high risk, partly because it includes changes to the tax system that Parliament has not yet adopted, and described tax revenue assumptions as optimistic.

The Fiscal Council is an independent fiscal watchdog that assesses the government's budget plans, macroeconomic forecasts and compliance with domestic and European Union fiscal rules. It cannot veto the budget or government decisions, but its opinions carry weight and the Finance Ministry is required to respond to its observations.