Risks and Trends

What Morawiecki said at Risks and Trends 2016

Risk and Trends 2016 Report 2016-02-16
Changes to public procurement, support for innovation and key exporters, as well as a gradual increase in the tax-free amount - these were the topics discussed by deputy PM Mateusz Morawiecki in a keynote speech opening Polityka Insight's conference.

Key points

The fuel that powers Poland's growth is running out. According to Mateusz Morawiecki, the growth of Poland's economy in recent decades has been powered by five factors: a demographic reserve, strong domestic consumption, absence of climate policy costs, access to cheap loans and domestic companies' ability to absorb western technologies. They are, however, largely running out. "If we take a bird's eye view of our economy, we will probably all agree that, regardless of how we assess the last 27 years, the fuel is either running out or ran out a long time ago and we are using boosters," said Morawiecki.

Priority sectors and freeing up innovation. According to Morawiecki, Poland has to seek new fuels to power its growth. Hence the plan of responsible and sustainable development which the deputy PM will present at the Cabinet's meeting today. Morawiecki wants to strengthen industry, increase company specialisation and support priority sectors, such as space, motoring, rail and shipbuilding industries. The plan also envisages freeing business in areas of innovation. Morawiecki pointed out that at present, one kilogram of Polish exports is worth an average of EUR 1.7, compared to Germany's approximately EUR 4.

Changes to public procurement. One way to increase innovativeness should be updating the policy of public procurements, which absorb about PLN 150-160 billion a year. "Like France and Italy, we want to use the public procurement policy in an intelligent way - by increasing the importance of the innovation criterion, we will stimulate the development of more innovative enterprises in the private sector," said the deputy PM. In his view, the idea is not just to support start-ups, but also to put an emphasis on innovative processes in advanced services and industry.

Support for key investors and greater social solidarity. Morawiecki wants to provide more support for the 400-500 medium-sized exporters who are already successful on foreign markets and could become Poland's new growth engine. The current government's trademark will also be greater social solidarity. Morawiecki stressed the need to abandon the polarising-diffusion model in favour of a more balanced approach. He used Germany, where medium-sized companies (the so-called Mittelstand) export goods globally, as an example.

Private savings the Achilles heel of Poland's transformation. Morawiecki wants to put emphasis on creating mechanisms to increase private savings. Currently, investments make up 19 per cent of Poland's GDP, and savings even less - 16-17 per cent of GDP. According to the deputy PM, the strengthening of long-term savings should be effected by means of third pillar measures, employee share ownership and any other steps which will not be a burden on the state but will increase the incentive to save.

Cooperation between MinDev and MinFin is key. When asked about his conflicts with Paweł Szałamacha over competencies, the deputy PM pointed out that he cannot imagine conducting economic policy without close cooperation with MinFin, which is also trying to strike a balance between the stability of public finances and what is necessary for the development of the real economy. Morawiecki added that since the gambling scandal, all inter-departmental correspondence is public, which means that every remark is willingly considered a sign of a conflict within the government. "I can assure you that it is utter nonsense," said Morawiecki.

Tax-free amount will be raised gradually. Morawiecki expressed hope that EurCom's recent forecasts regarding Poland exceeding the 3 per cent deficit threshold would prove to be wrong. In his view, Brussels assumptions do not take into account the additional budget revenues due to increased VAT and CIT collection. On the other hand, EurCom assumes that budget spending will be fully implemented, including the increase of the tax-free amount, which the government plans to raise gradually to avoid destabilising public finances.

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Robert Tomaszewski
Head of Energy Sector Desk
Robert Tomaszewski
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