2002 OECD Economic Surveys: Poland 2002

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This 2002 edition of OECD's periodic review of Poland's economy examines recent economic developments, policies, and prospects and includes special features on public expenditure management and structural reform.

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Improving the Efficiency and Sustainability of Public Expenditure

Notwithstanding the decline in public expenditure between 1990 and 1995, government spending has remained a relatively stable and high share of GDP (46 per cent in 2001). Moreover, as discussed in Chapter II, the rapid rise in the general government deficit in 2001 and medium-term spending pressures suggest that a fiscal consolidation will be necessary in order to prevent the debt from reaching its constitutional limit of 60 per cent of GDP. A number of important steps to control the future evolution of spending, such as the 1999 pension and the more recent (and arguably less successful) healthcare sector reform, have already been made but much more needs to be done. A further tax increase appears undesirable given the country’s already high tax burden and evidence that associates this with slower growth. Rather, budget consolidation and the government’s goal of increasing the economy’s potential rate of growth can best be achieved by a far ranging reevaluation and re-orientation of spending away from personal transfers that contribute to inactivity traps and towards productivity and employment augmenting policies. This, in turn, will require substantial improvements to public expenditure management systems so as to provide the authorities with the tools they need to identify and effectuate needed budgetary reallocations.

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