(MENAFN- AFP) Poland said Monday it would raise spending next year, but still keep its deficit just under an EU-wide limit of 3.0 percent of GDP, while also cutting the growth forecast for central Europe's largest economy.
The finance ministry pegged the 2017 deficit at 2.9 percent of GDP in a Monday statement, or 59.3 billion zloty (137 billion euro, $156 billion).
The figure totals around five billion zloty more in deficit spending over 2016, Poland's Puls Biznesu financial daily reported.
The ministry also dialled down its growth estimate for 2017 from 3.9 percent to 3.6 percent, with average annual inflation set to hit 1.3 percent. It also revised its growth forecast for this year to 3.4 percent, down from 3.6 percent.
Poland's populist Law and Justice (PiS) government won an October 2015 election on promises of generous social spending, raising concerns it could bloat the country's moderate public debt.
The IMF said in July it expected spending to increase "the budget deficit to 2.8 percent of GDP in 2016 and to over 3 percent of GDP in 2017", compared to 2.6 percent in 2015, before a planned return to fiscal consolidation from 2018.
Domestically, "controversial policy initiatives or fiscal slippages could worsen investor sentiment and hinder economic expansion."
The IMF said growth would accelerate to 3.7 percent in 2017 from an estimated 3.5 this year, thanks to "strong private consumption supported by the new child benefit scheme, before moderating over the medium term".
But it cautioned that "financial market volatility, and a marked slowdown in emerging markets could propagate into Poland".
In May, global ratings agency Moody's cut Poland's outlook from stable to negative over "fiscal risks" posed by its right-wing government, but left its investment grade unchanged.
The change was Moody's first such move in over a decade and came after a deeper ratings cut in January by Standard and Poor's, which blamed the PiS government for "weakening institutions."
The PiS has pushed through several pieces of controversial legislation including institutional changes to Poland's constitutional court and public media that critics both at home and abroad -- including the EU -- have slammed as undermining democratic checks and balances.
A nation of 38 million people, Poland, which has yet to join the eurozone, remains one of the EU's most vibrant economies, clocking uninterrupted annual growth since shedding communism in 1989.
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