Poland sees 2027 budget deficit at 7.1% of GDP, growth at 3%

By Karol Badohal and Pawel Florkiewicz

WARSAW, Aug 28 (Reuters) - Poland expects its general government deficit to remain unchanged at 7.1% of GDP in 2027, the same level now planned for this year, fuelled by record deliveries of military equipment, Finance Minister Andrzej Domanski said on Friday.

The government had previously assumed a deficit of 6.8% of GDP for this year, down from 7.3% in 2025.

"The level of military equipment deliveries forecast for next year will be absolutely record-breaking," Domanski said while presenting the draft of next year's budget. "If we had a level of deliveries close to 2025, this deficit would be significantly lower."

Budget revenue is projected at 695 billion zlotys ($186.82 billion), with expenditures at 977.6 billion zlotys. Defence spending would account for 198 billion zlotys, or more than 4.5% of GDP.

The budget deficit for 2027 is planned at 286.6 billion zlotys.

Poland's defence spending has surged since Russia's invasion of neighbouring Ukraine three years ago.

The country, which has been subject to the European Union's excessive deficit procedure since July 2024, appears to be making no progress in correcting its excessive deficit, ING analysts said in a note.

Failure to bring the deficit below its target of 3% of GDP is likely to force consolidation measures in public finances, they said.

GOVERNMENT FACES HIGHER INTEREST RATES

Gross borrowing needs are expected to fall to below 565 billion zlotys from 600 billion zlotys in 2026.

Debt servicing costs planned for 2027 are expected to reach 107 billion zlotys, which is 17 billion zlotys more than this year.

Minister Domanski said this is due to the fact that the state budget must now refinance itself at higher interest rates, whereas in 2020 and 2021 they were "almost zero."

He also said the government assumes 2027 economic growth at 3.0% and inflation at 2.8% versus 3.6% growth and 3% inflation this year.

Deputy Finance Minister Hanna Majszczyk said the government now expected 2026 budget revenue to be lower than planned.

($1 = 3.7202 zlotys)

(Reporting by Karol Badohal and Pawel Florkiewicz; Editing by Conor Humphries)