April 28, 2020 / 1:17 PM / a month ago

UPDATE 2-Poland expects its economy to shrink 3.4% in 2020 -fin min

(Updates with finance ministry confirmation, details)

WARSAW, April 28 (Reuters) - Poland’s economy will shrink by 3.4% percent this year and the government deficit will rise to 8.4% of gross domestic product due to the coronavirus pandemic, the finance ministry said on Tuesday, citing forecasts in a report it prepared for the EU.

Public debt is set to rise to 55.2% of gross domestic product from 46% last year, it added, confirming a figure first reported by the Dziennik Gazeta Prawna daily.

Exports are expected to contract by 7% and imports by 9.7%, while investments are seen rising by 4.3%, the report said. Inflation is seen at 2.8% this year.

European Union member states are required to lay out their fiscal plans for the next three years every April. Those that have not yet joined the euro - such as Poland - also have to spell out convergence steps, including additional details on monetary policy.

Government forecasters had previously predicted Poland’s economy would shrink by between 1.0% and 4.5% due to the pandemic, which has already killed 596 people in the country of 38 million and hit thousands of businesses, prompting layoffs.

Poland, the biggest ex-communist EU member state, has introduced a package of measures to support the economy that the government says is worth more than 300 billion zlotys ($72 billion). Some of this will comprise direct government spending.

The government plans to amend the 2020 state budget in June to reflect the increased spending, putting upward pressure on the government deficit, seen previously at around 1.2% of GDP.

A Reuters poll of analysts sees Poland’s economy contracting by 3.6% this year. ($1 = 4.1735 zlotys) (Reporting by Pawel Florkiewicz and Marcin Goclowski, Editing by Gareth Jones)

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