04 SEP 2010

By Andra Timu and Irina Savu | Bloomberg

Polish inflation shouldn’t exceed the central bank’s target “by much” as an increase in the value-added tax from next year boost consumer-price growth by 0.3 percentage points, Governor Marek Belka said.

The full effects of the raising of the VAT rate on non-food items by one percentage point to 23 percent are still not known, which has left the bank “in a wait-and-see mode” on future policy decisions, Belka said at a financial conference in Bucharest today.

“Inflation should not exceed the target by much,” he said. Consumer prices rose 2 percent in July, compared with the bank’s target of 2.5 percent.

The government is raising taxes and keeping expenditures in check to hold public debt below 55 percent of gross domestic product and avoid mandatory spending cuts. Poland is required to bring the gap in line with the European Union limit of 3 percent of GDP by 2012 after it widened to 7.1 percent last year as GDP growth slowed to 1.8 percent, the lowest in almost a decade.

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