Polish government passes budget with record spending on defense and health – and record deficit

The Polish government has approved a draft budget for 2025. The plans – which include increasing defense spending to 4.7 percent of GDP, increasing health spending by 16 percent and financing new social programs – will create the highest budget deficit in the country’s history at 289 billion zloty (67.3 billion euros).

It is the first time that the coalition government, which took power in December, has been able to present a completely independent budget after largely inheriting the 2024 spending plans from the former Law and Justice Party (PiS) government.

“The budget for 2025 is being drawn up in the context of a significantly accelerating Polish economy,” said Finance Minister Andrzej Domański as he announced the plans together with Prime Minister Donald Tusk.

The government expects the economy to grow by 3.1 percent this year. In 2023, economic growth was only 0.2 percent. It is then expected to rise further to 3.9 percent by 2025.

The Finance Ministry points out that the release of billions of euros from the EU’s post-pandemic recovery fund – which had been frozen by Brussels under the PiS government due to rule of law concerns – is one of the factors now boosting growth.

As a result, we have managed to “combine the good situation of the Polish economy with the material and financial security of people, especially those most in need,” said Domański.

Sorry for the interruption in reading. The article continues below.

Notes from Poland is run by a small editorial team and published by an independent, non-profit foundation funded by donations from our readers. We cannot do our work without your support.

The budget for 2025 provides for healthcare spending of almost 222 billion zlotys, 16 percent more than this year. It also provides funds for new government measures: 8.4 billion zlotys for the “Active Parents” program and at least 3.2 billion zlotys for “widows’ pensions.”

Meanwhile, Poland’s defense spending – already relatively the highest in NATO this year at an estimated 4.1 percent of GDP – will continue to rise next year, reaching 187 billion zloty, equivalent to 4.7 percent of estimated GDP.

The Minister for Funds and Regional Policy, Katarzyna Pełczyńska-Nałęcz, also celebrated on Twitter the fact that the budget allocates 4.3 billion zlotys for housing construction, 50 percent more than this year.

The total government deficit will rise to a record 289 billion zlotys, equivalent to 7.3 percent of GDP (compared to 5.1 percent in 2024), and the general government deficit will be 5.5 percent.

“This high deficit is due to the measures we have taken in recent months, but also to the deferral and repayment of debts incurred by our predecessors due to COVID-19,” Domański said, according to Business Insider Polska.

However, former PiS Prime Minister Mateusz Morawiecki accused the new government of hypocrisy, pointing out that Tusk had criticized the budget deficit while in opposition and was now presenting a budget with a record deficit.

Public debt will now reach 59.8 percent of GDP – up from 54.6 percent in 2024 and just below the EU limit of 60 percent. Last month, the EU initiated an excessive deficit procedure against Poland and six other member states due to concerns about public finances.

This procedure means that 2025 will be the “last such generous budget,” Piotr Kuczyński, chief analyst at investment firm Xelion, told news website Gazeta.pl. Kuczyński also expressed doubts about the accuracy of the government’s figures, pointing to obvious discrepancies in the published calculations.

However, Deputy Prime Minister Krzysztof Gawkowski claimed that “the chaos in public finances left by our predecessors” was responsible for Poland being placed under the excessive deficit procedure. The new government is now in the process of “cleaning up the mess,” he added.

The draft budget will undergo further discussions before it is presented to Parliament at the end of September. Kuczyński believes that the document could undergo significant changes by then.

Photo credit: Kancelaria Premiera/Flickr (under CC BY-NC-ND 2.0)

Daniel Tilles is editor-in-chief of Notes from PolandHe has written on Polish affairs for a variety of publications, including Foreign policy, POLITICO Europe, EUobserver And Chinese Newspaper Pravna.