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ppt - Slide 1

VIEWS: 9 PAGES: 43

									            Poland
Social Sector and Public Wages
  Public Expenditure Review

From Maastricht to Vision 2030
         Overview

           Warsaw Poland
                 ,
           May 17, 2010
           From Maastricht to Vision 2030
• Poland spends fairly well
   – Recent reforms lowered spending
   – High efficiency and good equity
   – Cheque is in the mail
• But there is need for change
   – Poland 2030
   – Crisis 2009
• Direction of reform
           s
   – Fiscal
   – Structural
Poland Spends Fairly Well
            Poland lowered social spending recently
EU general government expenditures on social sectors, percent of GDP

                                   2003           2008   EU27 Average in 2008
 40



 35



 30



 25



 20



 15
              LV




              PT
              CY




                SI




                FI
              BE
                IE




                IT




              FR
              BG




              MT
              CZ
               LT



              LU




              GR
               PL




              DK
       SK




              AT



               SE
              UK

              DE
              HU
               EE
               ES
              RO




            EU15
              NL




            EU27



Source: Eurostat, World Bank staff calculations
  Poland net social spending is less than thought
  EU net and gross social protection benefits in 2005, percent of GDP




Source: Eurostat, World Bank staff calculations
                                 Efficiency in Education




Source: Verhoeven et al. 2007.
                                 Efficiency in Health




Source: Verhoeven et al. 2007.
                                Equity across Gminas
Fiscal Equalization in Gminas by Own Revenue Per Capita Quartiles in 2006 (PLN Per Capita)
     2600                                                                        2600

     2400                                                                        2400
                                       Total Revenues
     2200                                                                        2200

     2000                                                                        2000

     1800                                                                        1800

     1600                                                                        1600

     1400                                                                        1400

     1200                                                                        1200

     1000                                                                        1000
                                                        Own Revenues
      800                                                                        800

      600                                                                        600

      400                                                                        400

      200                                                                        200

        0                                                                        0
                   Bottom                    2                         3   Top

     Source: World Bank staff calculations
                              Equity in Education
   Access to Schooling by Household Per Capita Consumption Quintile in 2007
 100
                                         No School
                                          Private
  90                                      School

  80

  70

  60

  50

  40
                                             Public
  30                                         School


  20

  10

   0
             Bottom                2                  3   4        Top

Source: HBS, World Bank staff calculations
                                   Equity in Health
    Access to General Practitioner by Household Income Per Capita Quintile in 2007




Source: PORCS, World Bank staff calculations
Poland spends (& taxes) fairly well – Cheque is in the mail
       Fiscal Costs of Structural Reform (% of GDP)
      4.0                                                                                           4.0


      3.5                                                                  Pension reform           3.5


      3.0                                                                                           3.0


      2.5                                                              Tax wedge reduction          2.5


      2.0                                                                                           2.0


      1.5                                                                                           1.5


      1.0                                                                                           1.0


      0.5                                                                                           0.5


      0.0                                                                                           0.0
                  2007                2008               2009                2010            2011


    Source: Eurostat, Central statistical Office, World Bank Staff Calculations
Poland spends (& taxes) fairly well – Cheque is in the mail
 Tax wedge on Labor Cost in 2008 for an Employed Person with Low Earnings

      60


      50

              EU27 Average
      40


      30


      20


      10


       0
              LV




           PLL06
              PT
              CY




                FI




                SI
            PL09


            PL08




              BE
              CZ
                IE
              MT




                IT

              FR
              BG




               LT
              LU




               SK
              GR




              AT
              DK
              UK




               SE




              DE
              HU
               EE
               ES




              RO
              NL
            EU27
            EU15




     Source: Eurostat, World Bank staff calculations
Poland spends (& taxes) fairly well – Cheque is in the mail
 Employment Rate (Persons in employment divided by the total population of the same age group)




  Source: Eurostat, World Bank staff calculations
Poland spends fairly well – Cheque is in the mail
Age-Related General Government Spending in 2007 and 2060 (% of GDP)
40


35


30         EU27 2060 Average


25


20


15


10


5


0
                              LT




                                                                                                                                                     LU
                                                                                                                  SE
                                                         HU
                                                              IE




                                                                                                                                                GR
                                                                             IT
                                                                        DK
     LV


               PL
          EE




                                                                                                                            FI



                                                                                                                                           SI
                                                                                                             AT
                    BG




                                                                                                                       NL
                                                    UK




                                                                                              ES




                                                                                                                                 FR
                                                                                                   DE
                                                                                         PT
                                                                   CY
                         SK




                                                                                                        MT
                                   EU10




                                                                                                                                      BE
                                                                                  EU27
                                               CZ
                                          RO




 Source: Eurostat, Central statistical Office, World Bank Staff Calculations
Need for Change
Poland 2030
                                                         e
    Poland’s social sector is large relative to its incom level
Social Sector Expenditures as Percent of GDP Relative to GDP per capita in PPS (EU27=100 in 2008)

                                            40

                                                                                                                        DK

                                            35                                                               FR          FI
          Social Expenditures as % of GDP




                                                                                                                   PT        NL
                                                                                                         EU15
                                                                                                                  BE
                                            30                                                          IT         DE
                                                                                    AT                EU27         SE
                                                                        HU                    SI GR
                                                                                                                                  MT
                                                                                                                                  IE
                                                                 PL
                                            25                                      LU
                                                                                         CZ             ES
                                                                       LT EE

                                                            RO
                                                           BG     LV                             CY
                                            20                                 SK



                                            15
                                                 20   40         60                 80          100               120             140

                                                                          PPS per capita


        Source: Eurostat, Central statistical Office, World Bank Staff Calculations
                             Global Financial Crisis 2009
             Gradual Unwinding to meet Maastricht 3%…
                     Projected general government deficit, percent of GDP

                   2009                 2010                 2011                 2012
      0

     -1

     -2
                                                                           -2.9
                                                                                                Gov. CP
     -3
                   -7.1                 -7.3                 -7.0                               EC
     -4
                                                                                                IMF
     -5
                                                      -5.9                               -5.8
     -6
                                 -6.9                               -6.9
            -7.2          -7.2
     -7                                        -7.5

     -8

Source: Convergence and Stability Program Updates from January/February 2010, EC Spring Forecast 2010,
WEO April 2010, World Bank staff calculations
                      … and public debt targets
                      Projected general government debt, percent of GDP

   62
   60
                                                                              60.5
   58
                                                              58.3
   56
                                                56.3                 55.8
   54                                      55                                               Gov. CP
   52                        53.1                      59.3                                 EC
   50     50.7        51                                                                    IMF
                                    53.9
   48
                 51
   46
   44
               2009               2010               2011               2012

Source: Convergence and Stability Program Updates from January/February 2010, WEO April 2010, World Bank staff
calculations.
Fiscal Development and Consolidation Strategy
• By 2012: fiscal deficit of 2.9% of GDP
  – Discretionary Expenditures
  – Non-Discretionary Expenditures
  – Revenues

• Beyond 2012: 1% structural fiscal deficit and
  40% government expenditures
  – Fiscal Rule
Growth
                          Average 2003-2008        2009        2010     2011       2012
 6

 5
        5.1                            5.1                            5.1
                           4.5
 4                               4.2
                                                               3.9
 3                                                       3.2                            3.3
                    3.0
                                                   2.7                            2.7
 2
              1.7                            1.7                            1.7
 1

 0
                 Gov. CP                           IMF                            EC


Source: Convergence and Stability Program Updates from January/February 2010, EC Spring Forecast 2010,
IMF Article IV, World Bank staff calculations
Revenue
                             Average 2003-2008         2009          2010     2011         2012
 41

 40                          40.3 40.3                               40.2
                      39.6                                    39.7
 39                                                    39.4                                      39.3
        39.1                             39.1                               39.1
                                                                                          38.7
 38

 37            37.4                             37.4                               37.4


 36

 35
                  Gov. CP                              IMF                                EC




Source: Convergence and Stability Program Updates from January/February 2010, EC Spring Forecast 2010,
IMF Article IV, World Bank staff calculations
Expenditures
                              Average 2003-2008           2009          2010     2011         2012
  48

  47
                                                          46.8
                       46.5                                      46.6
  46                          46.2                                                                  46.2
                                                                        45.9                 46.0
  45
                44.6                               44.6                               44.5
  44

  43     43.3                        43.3   43.3                               43.3

  42

  41
                   Gov. CP                                IMF                                EC



Source: Convergence and Stability Program Updates from January/February 2010, EC Spring Forecast 2010,
IMF Article IV, World Bank staff calculations
Expenditure and revenue-based consolidation
…
       Composition of fiscal deficit reduction from 2009 to 2012, percent of GDP

                      Expenditures                Revenues                Fiscal deficit

 5.0
 4.5
 4.0
 3.5
 3.0
 2.5
 2.0
 1.5
 1.0
 0.5
 0.0
                    EU15                          EU10                             PL

Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff
calculations
 … including of social benefits and public wages …
Composition of general government expenditure reduction from 2009 to 2012, percent of GDP




 Source: Convergence and Stability Program Update 2010, World Bank staff calculations
            … and structural adjustment …
Composition of primary deficit reduction from 2009 to 2012, percent of GDP


             Cyclical component         Structural primary balance            Primary balance

 5.0
 4.5
 4.0
 3.5
 3.0
 2.5
 2.0
 1.5
 1.0
 0.5
 0.0
                          EU10                                           PL

Source: Convergence and Stability Program Updates from January/February 2010, World Bank staff
calculations
… as actual output remains below potential output
      Output Gap, actual output as percent of potential output, 2008-12




       Source: World Bank staff based on CP updates
  Fiscal consolidation measures in 2010 – Visegrad Countries

                        Pensions                 Public wages   Revenues

  PL                       No                       Minor        Minor

  CZ                     Minor                      Minor        Major

  HU                      Yes                        Yes         Major

  SK                       No                        Yes         Minor




 Source: World Bank staff based on CP updates
Directions of Reform
     Reform Directions - Sectors

•   Public W ages
•   Pension
•   Education
•   Health
•   Social Assistance
•   Labor
•   Public Financial Management
                            Reform Directions – Public Wages
       – Adjust em      ent its
                   ploym lim in the budget to reflect actual utilization
       – Allow adjusted wage bill to grow with CPI over medium term
       – Increase transparency of public wage bill


   Nominal Growth Rates of Wages and Wage Bill              Budget Execution of Employment Limits and Wage
                  (2004 to 2009)                                      Expenditures (2003 to 2008)

                                                                         Filled Posts              Wage Expenditures
                                                  100
                                                   99
                                                   98
                                                   97
                                                   96
                                                   95
                                                   94
                                                   93
                                                   92
                                                   91
                                                   90
                                                            2003        2004            2005    2006      2007         2008

Source: World Bank staff calculations                   Source: World Bank staff calculations
                                                      Reform Directions – Pensions
       –                            ent
                     Raise retirem age, especially for wom     en
       –             Align disability benefits with pension benefits
       –                                      es,
                     Integrate special schem phase out pensions priviledges
       –             Shift to full CPI indexation
       –             Strengthen 2nd pillar through reduction in m        ent
                                                                   anagem fees and adoption of multiple portfolios


      Shares and Expenditure Levels of Households by                                             State Budget Subsidy Per Beneficiary (PLN)
               Household Head (2008 HBS)
                         Population Share, (LHS)
                         Share below Income Threshold PLN504, (LHS)
                         Per Capita Expenditure (PLN), (RHS)
60                                                                                 1000
                                                                                   900
50                                                                                 800
40                                                                                 700
                                                                                   600
30                                                                                 500
                                                                                   400
20                                                                                 300
10                                                                                 200
                                                                                   100
0                                                                                  0
           Retired




                            employed




                                                        Inactive &




                                                                      Unemployed
                                           Employee




                                                         Student
                              Self-




Source: World Bank Staff calculations based on HBS 2008                                   Source: World Bank Staff calculations
  Reform Directions – Pensions in Fiscal Consolidation Strategy
                                                            Pensions
 Increase of retirement         Initiate gradual increase and equalization of the retirement age for women and men which
 age, especially for             would not include people over 55
 women

 Alignment of disability        Introduce uniform principles of calculation of disability benefits and retirement benefits
 benefits with pension           in the pension system
 benefits
 Integration of special         Integrate uniformed services (soldiers, policemen, firemen, and others) into public
 schemes                         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           Consider reforms to increase the effectiveness of pension pillars through external
 pillar                          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
                        Reform Directions – Education
– Increase coverage of preschool education
– D      ine
    eterm per-student allocation of education subvention based on standard class
  sizes etc
– Enhance equitable and fiscally sustainable financing of higher education
                    Education Subvention and Primary and Secondary Students
                                      (2000/01 to 2007/08)
                                    Pupils (mn), (LHS)
                                    Education Subvention (PLN bn, constant prices), (RHS)
            7.0                                                                                             24

                                                                                                            23
            6.5

                                                                                                            22
            6.0
                                                                                                            21

            5.5
                                                                                                            20

            5.0                                                                                             19
                                    2001/02


                                                2002/03




                                                                    2004/05


                                                                              2005/06


                                                                                        2006/07


                                                                                                  2007/08
                        2000/01




                                                          2003/04




            Source: World Bank Staff calculations
                            Reform Directions – Health
– Large increases in health spending over the recent years allow for savings in N F
                                                                                 H
  subsidy
– U hospital corporatization, D G accreditation to im
   se                          R s,                   prove spending efficiency
                            Public and Private Health Spending as % of GDP
                                                       Private   Public
         8

         7

         6

         5

         4

         3

         2

         1

         0
                        2005                          2006          2007   2008

        Source: OECD, World Bank Staff calculations
              Reform Directions – Social Assistance
–                                                 it
    Enhance outreach to vulnerable groups to lim coverage gaps
–   Step up central monitoring and supervision to ensure consistent application of standards
–                                               it
    Enhance cross-checking of databases to lim leakage
–                     ily
    Fund increased fam benefit entitlem ents
                        Reform Directions – Labor Market Programs
       – Ensure adequate financing of unemployment benefits
       – Introduce system for monitoring and evaluation of labor market
         programs
       – Develop activation policies

               Labor Fund Balance as % of Revenues,                               Distribution of Expenditures on Unemployment Benefit by
            2009-2011 Projection (Sc1: 8.7%; Sc2: 11.2%)                                     Consumption Decile 2005 and 2007
                                 Scenario 1     Scenario 2                                                     2005     2007
35                                                                         16
30                                                                         14
25
                                                                           12
20
15                                                                         10
10                                                                         8
  5
                                                                           6
  0
 -5                                                                        4

-10                                                                        2
-15
                                                                           0
        2005       2006       2007       2008      2009      2010   2011
                                                                                  D1      D2      D3      D4       D5   D6     D7   D8   D9   D10

Source: World Bank Staff calculations                                      Source: World Bank Staff calculations
 Reform Directions – Public Financial Management
Implement roadmap for performance-based and medium-term budgeting
Indicative Composition of Public Expenditure Savings
Summary
• Achieving medium-term fiscal consolidation targets
  depends on
  – Dem ographic dividend
  –M oderate wage growth
  – Strong revenue growth
  – High econom growth
                ic

• Achieving long-term structural targets requires
  additional entitlement and fiscal reforms
    THANKS

krichter@worldbank.org
Indicative Medium-term Public Expenditure Savings

								
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