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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
Source: Eurostat, World Bank staff calculations
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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(& ) Poland spends taxes fairly well Chequeis in the mail
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
Source: Eurostat, World Bank staff calculations
EU27 Average
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(& ) Poland spends taxes fairly well Chequeis in the mail
Source: Eurostat, World Bank staff calculations
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)
Source: Eurostat, Central statistical Office, World Bank Staff Calculations
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)
Source: Eurostat, Central statistical Office, World Bank Staff Calculations
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
Source: Convergence and Stability Program Updates from January/February 2010, EC Spring Forecast 2010,IMF Article IV, World Bank staff calculations
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
Source: Convergence and Stability Program Updates from January/February 2010, EC Spring Forecast 2010,IMF Article IV, World Bank staff calculations
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