From Maastricht to Vision 2030 - World Bank Public Expenditure Review for Poland (PER), Overview, 2010.05.17

8/6/2019 From Maastricht to Vision 2030 - World Bank Public Expenditure Review for Poland (PER), Overview, 2010.05.17

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,arsaw Poland17, 2010ay

Poland

Social Sector and Public WagesPublic Expenditure Review

From Maastricht to Vision 2030

Overview


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2030From Maastricht to Vision

oland spends fairly well Recent reforms lowered spending

High efficiency and good equity

Cheque is in the mail

ut there is need for change 2030Poland

2009Crisis

irections of reform Fiscal Structural


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Poland Spends FairlyWell


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Poland lowered social spendingrecently

15

20

25

30

35

40

SK BG CY LV RO LT EE ES LU CZ MT PL IENL HU SIGR UK PT DEEU27

ITEU15

BE AT FI FR SE DK

2003 2008 EU27 Average in 2008

Source: Eurostat, World Bank staff calculations

EU general government expenditures on social sectors, percent of GDP


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Poland net social spending is lessthan thought


EU net and gross social protection benefits in 2005, percent of GDP


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Efficiency in Education

Source: Verhoeven et al. 2007.


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Efficiency in Health

Source: Verhoeven et al. 2007.


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Equity across GminasFiscal Equalization in Gminas by Own Revenue Per Capita Quartiles in 2006 (PLN Per Capita)

Total Revenues

Own Revenues

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

2600

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2200

2400

2600

Bottom 2 3 Top

Source: World Bank staff calculations


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Equity in EducationAccess to Schooling by Household Per Capita Consumption Quintile in 2007

PublicSchool

PrivateSchool

No School

0

10

20

30

40

50

60

70

80

90

100

Bottom 2 3 4 Top

Source: HBS, World Bank staff calculations


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Equity in Health

Source: PORCS, World Bank staff calculations

Access to General Practitioner by Household Income Per Capita Quintile in 2007


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(& ) Poland spends taxes fairly well Chequeis in the mail

Fiscal Costs of Structural Reform (% of GDP)

Pension reform

Tax wedge reduction

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2007 2008 2009 2010 2011

Source: Eurostat, Central statistical Office, World Bank Staff Calculations


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0

10

20

30

40

50

60

CY IEMT LU UK PT ES BG SK GR

PL09

EE FI

PL08

DK LV CZ LT SI

EU15 EU27

NL ROSE

PLL06

ITAT FR HU DE BE

Tax wedge on Labor Cost in 2008 for an Employed Person with Low Earnings


EU27 Average


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Employment Rate (Persons in employment divided by the total population of the same age group)


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Poland spends fairly well Cheque is inthe mail

Age-Related General Government Spending in 2007 and 2060 (% of GDP)


0

5

10

15

20

25

30

35

40

EE BG LTEU10

RO CZ UK DK ITEU27

PT DE AT SE FI B E LU

EU27 2060 Avera e


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Need for Change


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2030Poland


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Poland s social sector is large relative to itsincome level

Social Sector Expenditures as Percent of GDP Relative to GDP per capita in PPS (EU27=100 in 2008)


BE

DK

DE

IE

GR

ES

FR

IT

CY

LU

MT

NL

AT

PT

FI

SE

CZEE

LV

LT

BGSK

SI

RO

HU

PL

EU27

EU15

15

20

25

30

35

40

20 40 60 80 100 120 140

SocialExpendituresas%ofGDP

PPS per capita


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2009lobal Financial Crisis 3%Gradual Unwinding to meet Maastricht

Projected general government deficit, percent of GDP

Source: Convergence and Stability Program Updates from January/February 2010, EC Spring Forecast 2010,WEO April 2010, World Bank staff calculations

-7.2-6.9

-5.9

-2.9

-7.1 -7.3 -7.0

-7.2-7.5

-6.9

-5.8

-8

-7

-6

-5

-4

-3

-2

-1

0

2009 2010 2011 2012

Gov. CP

EC

IMF


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and public debt targets

Projected general government debt, percent of GDP

Source: Convergence and Stability Program Updates from January/February 2010, WEO April 2010, World Bankstaff calculations.

50.7

53.1

56.355.8

51

53.9

59.3

51

55

58.3

60.5

44

46

48

50

52

54

56

58

60

62

2009 2010 2011 2012

Gov. CP

EC

IMF


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Fiscal Development andConsolidation Strategy

2012: 2.9%By fiscal deficit of of GDP

Discretionary Expenditures

-Non Discretionary Expenditures

Revenues

2012: 1%Beyond structural fiscal40%deficit and government

expenditures Fiscal Rule


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Growth

Source: Convergence and Stability Program Updates from January/February 2010, EC Spring Forecast 2010,IMF Article IV, World Bank staff calculations

5.1 5.1 5.1

1.7 1.7 1.7

3.0

2.7 2.7

4.5

3.2 3.3

4.23.9

0

1

2

3

4

5

6

Gov. CP IMF EC

Average 2003-2008 2009 2010 2011 2012


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Revenue


39.1 39.1 39.1

37.4 37.4 37.4

39.639.4

38.7

40.3

39.7

39.3

40.3 40.2

35

36

37

38

39

40

41

Gov. CP IMF EC

Average 2003-2008 2009 2010 2011 2012


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Expenditures


43.3 43.3 43.3

44.6 44.6 44.5

46.546.8

46.046.2

46.646.2

43.3

45.9

41

42

43

44

45

46

47

48

Gov. CP IMF EC

Average 2003-2008 2009 2010 2011 2012


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-Expenditure and revenue basedconsolidation

Composition of fiscal deficit reduction from 2009 to 2012, percent of GDP

Source: Convergence and Stability Program Updates from January/February 2010, World Bank staffcalculations

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

EU15 EU10 PL

Expenditures Revenues Fiscal deficit


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including of social benefits and publicwages

Composition of general government expenditure reduction from 2009 to 2012, percent of GDP

Source: Convergence and Stability Program Update 2010, World Bank staff calculations


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and structural adjustment

Composition of primary deficit reduction from 2009 to 2012, percent of GDP

Source: Convergence and Stability Program Updates from January/February 2010, World Bank staffcalculations

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

EU10 PL

Cyclical component Structural primary balance Primary balance


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as actual output remain belowpotential output

Output Gap, actual output as percent of potential output, 2008-12

Source: World Bank staff based on CP updates


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2010 Fiscal consolidation measures inVisegrad Countries

Pensions ublic wages RevenuesPL No Minor MinorCZ Minor Minor MajorHU Yes Yes MajorSK No Yes Minor

Source: World Bank staff based on CP updates


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Directions of Reform


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-Reform Directions Sectors

Public Wages

Pension

Education

Health Social Assistance

Labor

Public Financial

Management


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Reform Directions Public Wages

Adjust employment limits in the budget to reflect actualutilization

Allow adjusted wage bill to grow with CPIover medium term Increase transparency of public wage bill

Nominal Growth Rates of Wages and Wage Bill(2004 to 2009)

90

91

92

93

94

95

96

97

98

99

100

2003 2004 2005 2006 2007 2008

Filled Posts Wage Expenditures

Budget Execution of Employment Limits and WageExpenditures (2003 to 2008)

Source: World Bank staff calculations Source: World Bank staff calculations


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Reform Directions Pensions

,Raise retirement age especially for women

Align disability benefits with pension benefits Integrate special schemes, phase out pensions priviledges Shift to full CPI indexation 2Strengthen ndpillar through reduction in management fees and

adoption of multiple portfolios

0100

2003004005006007008009001000

0

10

20

30

40

50

60

ere e-

employed mpoyee nacveStudentnempoye

Population Share, (LHS)

Share below Income Threshold PLN504, (LHS)

Per Capita Expenditure (PLN), (RHS)

Shares and Expenditure Levels of Households byHousehold Head (2008 HBS) State Budget Subsidy Per Beneficiary (PLN)

Source: World Bank Staff calculations based on HBS 2008 Source: World Bank Staff calculations


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Reform Directions Pensions in FiscalConsolidation Strategy

Pensions

Increase of retirement

age, especially forwomen

Initiate gradual increase and equalization of the retirement age for women and men which

would not include people over 55

Alignment of disabilitybenefits with pension

benefits

Introduce uniform principles of calculation of disability benefits and retirement benefitsin the pension system

Integration of special

schemes Integrate uniformed services (soldiers, policemen, firemen, and others) into public

pension, disability and health care systems from January 1, 2012 onwards

Consider equalizing retirement age for newcomers from January 1, 2012 onwards Initiate gradual reform of the farmers retirement and disability pension system while

maintaining KRUS as stand-alone entity

Strengthening of 2nd

pillar Consider reforms to increase the effectiveness of pension pillars through external

benchmark for OPF investments; life-cycle approach; and phasing out OFE investment

limits.

Introduce ban on promotion and advertising activities of OFE and further reduce

administration fees

Resolve the problem of rising accounting public debts generated due to different

classification of pension contributions collected in OFE and on individual pension

account in ZUS.

Source: Government Convergence Program Update 2010


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Reform Directions Education

Increase coverage of preschool education

-Determine per student allocation of education subventionbased on standard class sizes etc

Enhance equitable and fiscally sustainable financing ofhigher education

19

20

21

22

23

24

5.0

5.5

6.0

6.5

7.0

2000/0 1 2001/0 2 2002/0 3 2003/0 4 2004/0 5 2005/0 6 2006/0 7 2007/08

Pupils (mn), (LHS)

Education Subvention (PLN bn, constant prices), (RHS)

Education Subvention and Primary and Secondary Students(2000/01 to 2007/08)

Source: World Bank Staff calculations


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Reform Directions Health

Large increases in health spending over the recent yearsallow for savings in NHF subsidy

Usehospital corporatization, ,DRGs accreditation toimprove spending efficiency

0

1

2

3

4

5

6

7

8

2005 2006 2007 2008

Private Public

Public and Private Health Spending as % of GDP

Source: OECD, World Bank Staff calculations


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Reform Directions Social Assistance

Enhance outreach to vulnerable groups to limit coverage gaps

Step up central monitoring and supervision to ensure consistent

application of standards -Enhance cross checking of databases to limit leakage

Fund increased family benefit entitlements


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Reform Directions Labor Market Programs

Ensure adequate financing of unemployment

benefits Introduce system for monitoring and evaluation

of labor market programs

Develop activation policies

-15

-10-5

0

5

10

15

20

25

30

35

2005 2006 2007 2008 2009 2010 2011

Scenario 1 Scenario 2

Labor Fund Balance as % of Revenues,

2009-2011 Projection (Sc1: 8.7%; Sc2: 11.2%)

Distribution of Expenditures on Unemployment Benefit

by Consumption Decile 2005 and 2007

0

2

4

6

8

10

12

14

16

D1 D2 D3 D4 D5 D6 D7 D8 D9 D10

2005 2007

Source: World Bank Staff calculations Source: World Bank Staff calculations


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Reform Directions Public FinancialManagement

Implement roadmap for performance-based and medium-term budgeting

I di ti C iti f P bli E dit


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Indicative Composition of Public ExpenditureSavings


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Summary

-Achieving medium term fiscalconsolidation targets depends on

Demographic dividend

Moderate wage growth

Strong revenue growth High economic growth

-Achieving long term structuraltargets requires additional

entitlement and fiscal reforms


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THANKS

@krich te r w orld b a n k.org

I di ti M di t P bli


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-Indicative Medium term PublicExpenditure Savings

Documents

From Maastricht to Vision 2030 - World Bank Public Expenditure Review for Poland (PER), Overview, 2010.05.17