Economic stimulus and support programs

Various support programs for companies have been introduced in Poland. In addition, measures to stimulate the economy are underway.

Low-interest loans and non-repayable liquidity assistance are available to companies in Poland, depending on their size. In addition, subsidies for employees’ salaries can be applied for. However, these are only partially comparable with the short-time allowance. For one thing, companies still have to pay a large proportion of wages. For another, the amount of the subsidies is not based on the salaries of the respective employees, but on the minimum wage or the general average wage in the country.

Aid for particularly affected sectors

Many aid measures are particularly targeted at small and medium-sized enterprises. While the first aid measures in the spring were available to all companies, the later measures focus on particularly affected sectors of the economy. For example, the assistance introduced in December 2020 is targeted at 38 industries.

The same applies to the second version of the financial shield, which was launched in January 2021 and is intended to secure the liquidity of companies affected by the crisis. It is aimed at small and medium-sized enterprises in 54 industries. The current support measures are currently being repeatedly extended by three months with minor changes.

According to the International Monetary Fund, the support measures introduced and announced by the Polish government until the end of 2020 reach about 15 percent of domestic gross domestic product (GDP).

Measures for economic revitalization

The basis for the loans, liquidity assistance and salary subsidies is the so-called anti-crisis shield. In addition to measures to deal directly with the crisis, it also includes programs to support the economy in Poland. The shield has a total volume of around 47 billion euros.

The money is divided among the following five pillars:

1. Protection of jobs (6.6 billion euros)
2. Financing of companies (16.3 billion euros)
3. Health care (1.6 billion euros)
4. Strengthening the financial system (15.5 billion euros)
5. Public investment (6.6 billion euros)

The money for public investment is to be used to expand spending on infrastructure, including construction projects and in the areas of energy, digitization and environmental protection.

Poland’s Ministry for Funds and Regional Policy (Ministerstwo Funduszy i Polityki Regionalnej) is currently preparing a so-called National Reconstruction Plan (Krajowy Plan Odbudowy; KPO). The plan is a prerequisite for receiving funds from the European reconstruction instrument Next Generation EU. The funding priorities are to include the energy transition, digitization, infrastructure and the competitiveness of Polish companies. The final draft of the KPO is to be submitted to the European Commission in the first quarter of 2021.

Companies’ and municipalities’ willingness to invest to be stimulated

The government has also set up a fund for local investments (Rządowy Fundusz Inwestycji Lokalnych): Around 1.2 billion euros is available for municipalities. A sum of around 200 million euros has been earmarked for counties. The funds were distributed among the municipalities and counties on the basis of criteria such as the number of inhabitants and the unemployment rate.

In addition, a further 1.4 billion euros will be made available. The municipalities and counties must apply for these funds. As Poland’s Prime Minister Matuesz Morawiecki announced at the beginning of December 2020, the fund is to be continued in the coming years.

Poland’s central bank has already cut its key interest rate three times since the start of the Corona crisis. On March 17, 2020, the institution cut the rate from 1.5 percent to 1 percent. This was followed by another cut in the key rate to 0.5 percent on April 8, 2020, and to 0.1 percent on May 28, 2020.

Infrastructure projects and tax reform to boost economy

Details of the planned additional spending on public infrastructure are not yet known. Independent of the Corona crisis, however, comprehensive infrastructure programs are underway in Poland with the support of European funding. In June 2020, the government had allocated an additional €5 billion to the national road program.

The government has made it clear that it sees infrastructure investment as a crucial building block for getting out of the crisis. For example, infrastructure investments are to be accelerated as part of the planned central airport so that they can help revive Poland’s economy. In addition, an amendment to the construction law came into force on September 19, 2020, which is intended to simplify and accelerate construction projects.

In addition, the government presented a package of support measures for small and medium-sized enterprises at the beginning of October. These are also intended to stimulate companies’ willingness to invest. One component is the corporate tax reform based on the Estonian model, which has now been adopted. Under certain conditions, corporations will not have to pay tax from 2021 if their sales are below EUR 22 million and profits are reinvested.

Public debt grows

Before the outbreak of the Corona crisis, Poland’s government budget was in a comparatively good position. Consolidated gross debt stood at 46 percent of GDP in 2019, the eleventh lowest level within the European Union. Before the crisis, the government had envisaged a balanced budget for 2020. However, experts had described this as an unrealistic election campaign maneuver. In the meantime, the government expects a deficit of 12 percent of GDP for 2020. According to the draft budget of August 2020, the deficit will be 6 percent of GDP in 2021.

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