World Economy

Excessive Zloty Gains Would Hurt Polish Economy

Excessive Zloty Gains Would Hurt Polish EconomyExcessive Zloty Gains Would Hurt Polish Economy

While the Polish zloty is not too strong yet, further “excessive” gains against the euro wouldn’t be good for the economy, Poland’s Finance Minister Mateusz Szczurek said.

“Significant deflation that we have in Poland shows that zloty strengthening, an excessive one, wouldn’t be desired,” Szczurek said in an interview in Washington Saturday, Bloomberg reported.

Annual deflation eased to minus 1.5 percent in March from minus 1.6 percent in February. The Polish currency touched an almost four-year high against the euro earlier this week.

Poland, the only EU economy to avoid recession since the 2008-2009 financial crisis, cut its deficit to 3.2 percent of gross domestic product in 2014 and expects it to drop to 2.7 percent of GDP this year. As a consequence, it expects to leave EU’s excessive deficit procedure in 2015, or a year earlier than planned.

The procedure was imposed on the country in 2009 after its general government deficit hit 3.9 percent of GDP, breaking the EU rule that the shortfall must be kept at 3 percent or less. It forced Poland to freeze public wages and increase some taxes.

Lifting the restrictions, in theory, would allow Poland to boost wages in the public sector, introduce a tax break for research and development more popular than the existing one, and increase spending in 2016, according to Szczurek.