| BUSINESSWEEK ONLINE : APRIL 19, 1999 ISSUE | ||||||||
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| INTERNATIONAL BUSINESS
Poland's Finance Minister: 'The Tax Burden Must Be Reduced' Nearly a decade after launching Poland's economic reforms, Finance Minister Leszek Balcerowicz wants to finish the job. He is forcing privatizations and controversial spending reforms while holding together an uneasy coalition government. Meanwhile, he is under fire from abroad as signs of sluggish growth abound. He spoke of these challenges with correspondent Karen Lowry Miller in his 19th-century Warsaw office. Q: Is Poland's ''growth miracle'' over? A: I think Poland has the potential to grow at a rate of 6% a year with the proper economic policies and appropriate external environment. The slowdown in the Polish economy is a repetition of a slowdown in many countries. Then came the Russia shock. I would expect at least 4% growth this year. Q: Should investors worry about a widening current-account deficit? A: Last August the current account deficit was around 3% of gross domestic product, very safe. It shot up in the second half when exports fell because of the Russian crisis. These are one-time factors. The deficit should stabilize at about 5%, and it is almost fully covered by foreign direct investment. Q: What further economic reforms are needed? A: The tax burden must be reduced; it is now 40% of GDP. Second, we need to expand the tax base by closing loopholes and simplifying the system. All this obviously means doing something about expenditures, so we are back to looking at the functions of the state. Q: And that becomes a political issue. A: Every economic-policy decision is political. It's true we have some issues that have to be cleared up with our coalition partners. Tax and expenditures, these two first of all. Q: After such a roller-coaster decade, is the Polish economy becoming normal? A: It may well be. This is an interesting theoretical question--are business cycles possible in an emerging economy? Q: Many complain that corruption in Poland has gotten worse. A: It is not proven. There are subjective feelings and impressions, but no hard data. But assuming there is a problem, what should we do? Eliminate the sources and motives of corruption, and that means deregulating the economy. Corruption is linked to public spending, so that comes back to privatization. Q: That's a fairly fundamental problem. A: Look, 10 years ago, few people believed Poland would be a member of NATO. No one believed the Polish zloty could be convertible. Most people said: ''Poland an economic success? No way.'' One can take on small goals or large goals. I am for the second. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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