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 has reported 5,341 confirmed COVID-19 cases (with 164 deaths) as of April 9, 2020. The government introduced containment measures including closures of schools, universities, restaurants, and all non-essential retail trade and service outlets; bans on large gatherings; border controls; and travel restrictions. Staff of public sector institutions are working remotely.
Key Policy Responses as of April 9, 2020
New budgetary spending has been legislated, estimated at PLN 66 billion (2.9 percent of GDP). New credit guarantees and micro loans for entrepreneurs estimated at PLN 75 billion (3.3 percent of GDP) were also approved. Key measures include:
i. Additional funds for hospital equipment and supplies;
ii. 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 will cover social insurance contributions, and it ranges from 50 to 90 percent of the minimum wage for each employee, depending on the employers’ decrease in turnover in 2020.
iii. Increased guarantees from the national development bank (BGK) for enterprises;
iv. Additional loans for micro-firms;
v. Postponement or cancellation (for micro firms up to 9 employees, for 3 months) of social insurance contributions and possible deferral, payment in installments, or cancellation of taxes. The self-employed and employees working on civil contracts will receive a one-time benefit.
vi. Deduction of this year’s losses for 2021 tax settlement;
vii. An allowance for parents for school closures;
viii. Establishment of a public infrastructure investment fund.
On April 8 the government proposed an additional PLN 100 billion (4.5 percent of GDP) liquidity program for micro, small/medium, and large enterprises, to be financed by the Polish Development Fund. Up to 60 percent of the financing may be subject to later forgiveness, depending the conditions being met (maintaining employment, continuing business, and the level of lost sales).
MONETARY AND MACRO-FINANCIAL
The National Bank of Poland (NBP) reduced its policy interest rate by 50 bps on March 17, followed by an additional 50 bps reduction on April 8 to 50 bps. 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 raised the interest rate on required reserves to the level equal to the policy interest rate. It 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 non-financial private enterprises. Through April 9, the NBP had purchased approximately PLN 19 billion (0.8 percent of GDP) in Treasury 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 smoothing 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. 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.