Economic Policy Response to the COVID-19 Crisis: The Case of Poland

Konrad Sobanski

A chapter in Eurasian Business and Economics Perspectives, 2021, pp 107-118 from Springer

Abstract: Abstract The aim of this paper is to examine the economic policy response to the COVID-19 crisis in Poland. The paper investigates the rationale for the economic policy tools implemented, their costs, and potential consequences for the Polish economy. The analysis concentrates on the initial phase of the crisis (March–April 2020). The study proves that the scope of economic policy adjustments in Poland might be viewed as relatively wide. Monetary policy tools and fiscal packages implemented induce profound consequences for the Polish economy. The total new financing needed by the government for anti-crisis measures results in a significant increase in the public debt ratio, from 44% in 2019 to 51.5% in 2020, and in a state budget deficit of 7.6% of GDP in 2020. Although the projected debt ratio is still below the 55% alert threshold prescribed by the Polish legislation, policy makers should consider risk factors. First, under an extended lockdown scenario financing needs might be larger than initially estimated. Second, if the Polish zloty depreciates due to external pressures, the debt ratio increases even more as 30% of the Polish public debt is denominated in foreign currencies. Financing the fiscal packages is not possible without the support of the central bank (NBP). The scope of the quantitative easing policy required is comparable in relative terms to programmes implemented in the United States after 2009. Therefore, economic agents should expect an unprecedented increase in the NBP balance sheet and money in circulation. This should have an impact on price levels in Poland, at least in the long term. The worst-case scenario is stagflation, characterised by sluggish economic growth and rising inflation.

Keywords: Economic policy; COVID-19 crisis; Monetary tools; Fiscal tools (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:eurchp:978-3-030-71869-5_7

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DOI: 10.1007/978-3-030-71869-5_7

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