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Economic and Policy Response to Coronavirus

IMF Update on Policy Actions in Poland

IThe following information is copied straight from the IMF for your convenience. Also, find it here: https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#P

 

Summary: Poland reported its first confirmed COVID-19 case on March 5, 2020. The outbreak in Poland has slowed, with a low number of new cases daily. The government introduced containment measures including closures of schools, universities, restaurants, and all non-essential retail trade and service outlets, as well as bans on large gatherings, border controls, and travel restrictions. GDP contracted 0.4 percent quarter-on-quarter in Q1 2020, led by declines in private consumption and fixed investment. Data releases, including retail sales and industrial production, indicated that output contracted further in April. High-frequency indicators in May and June pointed towards a robust pick-up in economic activity as the economy reopened.

Reopening of the economy. On April 16, the government outlined a four-stage plan to reopen the economy. Starting on April 20 a larger number of people was allowed in shops and at religious gatherings, and public parks and forests were re-opened. The second phase of the lockdown easing plan was launched on May 4 with the re-opening of hotels and shopping malls (with limitations on the number of persons), the opening of daycares and pre-schools (as of May 6), as well as softening quarantine rules for cross-border workers and students. The third phase was launched on May 18, entailing reopening of restaurants, hairdressers and cosmetic salons, and permission for outdoor sport events with up to 50 persons with no audience. Grades 1-3 in primary schools opened on May 25 with strict sanitary rules, with a maximum number of children allowed in class. The fourth stage started on May 30, with the opening of cinemas, playgrounds, and gyms, all with stricter sanitary regimes than normal. Outdoor events are allowed with up to 150 people, with social distancing or face masks. Internal EU borders were opened on June 13, in with line EU recommendations.

 
Key Policy Responses as of October 8, 2020
FISCAL
  • New budgetary measures have been legislated, estimated at PLN 104 billion (4.6 percent of GDP). New credit guarantees and micro loans for entrepreneurs estimated at PLN 75 billion (3.3 percent of GDP) were also approved. Additionally, the Polish Development Fund will finance a PLN 100 billion (4.5 percent of GDP) liquidity program for businesses. Key measures include:

  • Additional funds for hospital equipment and supplies;

  • Wage subsidies for employees of affected businesses and self-employed persons. Businesses, regardless of their size, may apply for a three-month subsidy in the event of work stoppages or reduced working time. This subsidy covers social insurance contributions, and it ranges from 50 to 90 percent of the minimum wage for each employee, depending on recorded decrease in turnover in 2020. The subsidy includes furloughed employees.

  • Increased guarantees from the national development bank (BGK) for enterprises. A new Liquidity Guarantee Fund in BGK will be established offering guarantees for loans taken by medium and large companies;

  • Additional loans for micro-firms;

  • Postponement or cancellation of social insurance contributions. For micro firms with up to 9 employees social insurance contributions are covered by the budget for 3 months. For companies employing from 10 to 49 employees, 50 percent of social insurance contributions is paid by the budget. Possible deferral, payment in installments, or cancellation of taxes. The self-employed and employees working on civil law contracts can receive a one-time benefit.

  • Deduction of this year’s losses for 2021 tax settlement (tax returns for 2019 might be corrected in order to deduct the losses of 2020 from the 2019 income);

  • An allowance for parents of young children related to school closures;

  • A “solidarity benefit” for those who lost jobs after March 15, paid for three months (June-August);

  • An increase in the unemployment benefit by 39 percent during the first 90 days of unemployment;

  • To support the local tourism industry and families with children, a tourism voucher has been introduced, providing each child entitled to Family 500+ benefits with a one-time PLN 500 voucher to be spent at hotels or tourist events in Poland.

  • Establishment of a new fund (COVID Fund) dedicated to combat the negative impact of the pandemic with the balance sheet size of PLN 100 bn (revenues and expenditures at PLN 100 bn). The Fund is supervised by the Prime Minister but flows from the fund will be transferred to various ministers and other institutions involved in combating negative consequences of pandemic. Revenues are raised through the issuance of bonds by BGK (bonds are guaranteed by the State Treasury).

  • The Polish Development Fund is providing liquidity loans and subsidies for micro, small/medium, and large enterprises. The total value of the program equals PLN 100 billion. Approximately 60 percent of the financing may be non-returnable, upon fulfilling the relevant conditions related to maintaining employment, continuing business activity, and the level of lost sales.

  • Foreign workers permits are extended to stay in Poland and work.

 
MONETARY AND MACRO-FINANCIAL
  • The National Bank of Poland (NBP) reduced its policy interest rate by 140 bps to 10 bps, with rate cuts on March 17 (50 bps), April 8 (50 bps), and May 28 (40 bps), since March 17. The NBP has re-introduced repo (fine-tuning) operations to provide liquidity to banks, reduced the required reserve ratio from 3.5 to 0.5 percent, and changed the interest rate on required reserves to the level equal to the policy interest rate. The NBP has also begun purchases of Polish Treasury securities in the secondary market, and on April 8 expanded eligible securities to include those guaranteed by the State Treasury. The NBP has also introduced a program to provide funding for bank lending to enterprises. Through October 8th the NBP had purchased PLN 104billion (4.6 percent of GDP) in Treasury and in government guaranteed securities in the secondary market.

  • In addition, the 3 percent systemic risk buffer for bank capital requirements has been repealed. The Polish Financial Supervisory Authority (PFSA) announced measures related to provisions and reclassification of loans to existing SMEs/micro enterprises to allow distributing the impact of credit losses over a longer period. Some flexibility has been granted in how banks meet capital and liquidity requirements, and the PFSA is accepting the treatment of a BGK guarantee as fulfillment of the “special collateral” condition. The PFSA has adopted a flexible approach for the approval process of long-term guarantee measures under Solvency II for the insurance sector. The PFSA has also recommended a reduction in the risk weight for properties of borrowers that are not used for rentals, which would reduce bank capital requirements. Additionally, the Polish Banking Association has recommended voluntary deferral of loan payments for affected borrowers for up to three months. Banks have also increased limits for contactless credit cards.

 
EXCHANGE RATE AND BALANCE OF PAYMENTS
  • No information on foreign exchange intervention has been disclosed.

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