WARSAW: The International Monetary Fund praised Poland's central bank on Friday for its plan to keep interest rates stable until at least the middle of next year, saying it would support economic recovery.
"This is appropriate given expectations that inflation will rise slowly towards its target as the recovery gains traction," the IMF said in a statement after an annual review of Poland.
"Should the recovery falter and inflation fail to pick up as expected, there would be scope for further rate cuts."
Poland's central bank, which cut its benchmark interest rate by 225 basis points in total between November 2012 and July this year to a record low 2.5 per cent, pledged earlier this month to keep them unchanged until at least the middle of next year as economic recovery remains modest.
The IMF said it expected Poland's economic growth to accelerate to 2.7 per cent in 2014 from an estimated 1.3 per cent this year. "A recovery is underway and is expected to continue in 2014, driven by domestic demand," the IMF said.
"However, the pickup is expected to be gradual given the weak labour market and tepid credit expansion."
Poland is the only European Union member to have avoided recession since the start of the global financial crisis in 2008, but growth nearly ground to a halt at the start of 2013 as the economy was hit by weak external markets and cuts to public investment.
The IMF said there was a chance for a faster than currently expected rise in domestic demand, the pillar of the Polish economy.
However, Poland still needed to further gradually consolidate its public finances, it said. "As the recovery takes hold, fiscal consolidation should continue at a moderate pace in order to put the public debt ratio firmly on a downward path," the IMF said.
"It will be important to contain expenditures, avoid further cuts to public investment, and implement planned measures to strengthen tax administration."
The European Commission forecasts that Poland's deficit will widen to 4.8 per cent of GDP this year from 3.9 per cent last year, but the country is seen booking a one-off surplus of 4.6 per cent of GDP in 2014 thanks to a transfer of pension assets to the state.
The finance ministry expects public debt to rise to 58 per cent of GDP this year and subsequently fall to 49.9 per cent of GDP in 2014, also thanks to the pension asset transfer.
indiatimes.com
"This is appropriate given expectations that inflation will rise slowly towards its target as the recovery gains traction," the IMF said in a statement after an annual review of Poland.
"Should the recovery falter and inflation fail to pick up as expected, there would be scope for further rate cuts."
Poland's central bank, which cut its benchmark interest rate by 225 basis points in total between November 2012 and July this year to a record low 2.5 per cent, pledged earlier this month to keep them unchanged until at least the middle of next year as economic recovery remains modest.
The IMF said it expected Poland's economic growth to accelerate to 2.7 per cent in 2014 from an estimated 1.3 per cent this year. "A recovery is underway and is expected to continue in 2014, driven by domestic demand," the IMF said.
"However, the pickup is expected to be gradual given the weak labour market and tepid credit expansion."
Poland is the only European Union member to have avoided recession since the start of the global financial crisis in 2008, but growth nearly ground to a halt at the start of 2013 as the economy was hit by weak external markets and cuts to public investment.
The IMF said there was a chance for a faster than currently expected rise in domestic demand, the pillar of the Polish economy.
However, Poland still needed to further gradually consolidate its public finances, it said. "As the recovery takes hold, fiscal consolidation should continue at a moderate pace in order to put the public debt ratio firmly on a downward path," the IMF said.
"It will be important to contain expenditures, avoid further cuts to public investment, and implement planned measures to strengthen tax administration."
The European Commission forecasts that Poland's deficit will widen to 4.8 per cent of GDP this year from 3.9 per cent last year, but the country is seen booking a one-off surplus of 4.6 per cent of GDP in 2014 thanks to a transfer of pension assets to the state.
The finance ministry expects public debt to rise to 58 per cent of GDP this year and subsequently fall to 49.9 per cent of GDP in 2014, also thanks to the pension asset transfer.
indiatimes.com
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