This article is a part of Poland Unpacked. Weekly intelligence for decision-makers
Interactive chart An economist’s view: the sector deficit, not the budget deficit
It is worth bearing in mind that the size of the deficit in 2025 was significantly distorted by the repayment of liabilities of the Polish Development Fund and the COVID-19 Counteraction Fund. For this reason, simple year-on-year comparisons of the central government budget deficit may lead to misleading conclusions. A separate issue is that deficits should not be compared in nominal terms. The appropriate benchmark is their ratio to GDP.
From an economic perspective, what matters most is the deficit of the entire general government sector. This includes the result of the general government sector – not only the state budget, but also off-budget funds, including those operating at Bank Gospodarstwa Krajowego – alongside the local government sector and social security funds.
Explainer
BGK
Bank Gospodarstwa Krajowego (BGK) is Poland’s state development bank and one of the government’s key financial levers for long-term economic policy. Established to support strategic investments, BGK operates outside the commercial banking sector, directing capital toward infrastructure, innovation and projects deemed essential for national development.
In recent years it has become an increasingly prominent co-investor alongside EU programmes, channelling public funds into venture capital, regional development and SME support. BGK often partners with institutions such as PFR Ventures to mobilise private capital, strengthen the domestic financial ecosystem and reduce investment gaps in areas where market financing remains scarce.
Two Deficits
Why is it misleading to compare government budget deficits across years without taking into account the other components of the general government (GG) sector? The chart referenced in the title illustrates this clearly. Since 2020, there has been a marked gap – measured in percentage points of GDP – between the state budget deficit and the general government deficit. The main reason is the substantial expansion of off-budget funds after 2020.
These funds were initially created amid concerns that constitutional public-debt thresholds might be breached – an outcome that, in an extreme scenario, would have forced procyclical fiscal policy, meaning spending cuts or tax hikes during a recession.
There are, however, additional sources of divergence. The state budget deficit is calculated on a cash basis, whereas the EU methodology is accrual-based. In 2024, this difference amounted to 0.7 percentage points of GDP, although it was clearly smaller than in 2023. Final data for 2025 will be available after the sector has been consolidated, when Statistics Poland publishes its fiscal notification at the end of April. In the Budget Act for 2026, the Ministry of Finance projected the general government deficit for 2025 at 6.9% of GDP.
Revenues below expectations…
As early as the summer, I forecast that VAT revenues would amount to around PLN 318–323 billion (EUR 75-76 billion), which is PLN 26–30 billion (EUR 6.1–7.1 billion) less than assumed in the 2025 Budget Act (PLN 349.5 billion; EUR 82.5 billion). During work on the 2026 Budget Act, the Ministry of Finance presented its so‑called outturn forecast for 2025 and revised it down to PLN 325 billion (EUR 76.7 billion). In the end, value‑added tax receipts came in at PLN 321.5 billion (EUR 75.8 billion).
This fits a broader pattern. A similar sequence played out for almost all key central government revenue categories – VAT, excise duties, corporate income tax (CIT), and personal income tax (PIT). The 2025 outturn forecast presented alongside the 2026 Budget Act was lower than the assumptions set out in the 2025 Budget Act, and the actual outturn proved weaker still. The only exception was PIT, as illustrated in the chart below.
Taken together, estimated central government revenues in 2025 reached roughly 94 % of the level stipulated in the Budget Act.
Interactive chart …but 2026 revenues still realistic
This, however, should not significantly undermine the realism of the revenue assumptions for 2026. Compared with the outturn forecast presented in the 2026 Budget Act, the differences are noticeably smaller, ranging from –3.5 % for corporate income tax (CIT) to 2.5 % for personal income tax (PIT).
The only problem currently evident is the 2026 excise revenue forecast. Already, deviations from the 2025 tax base are visible, and these will be further amplified by the presidential veto of the excise hike. Nevertheless, it cannot be ruled out that this gap will be partially offset by other revenue sources. For example, the VAT revenue forecast for 2026 appears relatively conservative.
…expenditures also traditionally lower
The largest savings relative to the 2025 plan were recorded in Chapter 83 of the state budget (earmarked reserves), amounting to PLN 20.7 billion (EUR 4.9 billion). As is traditionally the case, the subsidy to the Social Insurance Institution (ZUS) was also lower than planned, with savings of PLN 17.2 billion (EUR 4.1 billion).
Taken together, estimated central government expenditures in 2025 reached 94.4 % of the level stipulated in the 2025 Budget Act.