Poland's new moderate PiS economics team announced

Poland's conservative Law and Justice Party (PiS), which won the recent parliamentary elections, announced the makeup of the new government today. Many of the new government members were insiders who also served during the last PiS government in Poland from 2005-07. However, the government appointed a number of more moderate economic policymakers, perhaps to calm financial market fears about the fiscal impact of the new government's social and redistributive programme.

Mateusz Morawiecki, a former CEO of Bank Zachodni WBK, will head the new Ministry of Development, which will coordinate economic policy for the Finance, Infrastructure, Energy and the Treasury Ministries. He seems to be a more moderate voice within the new government, with his experience on the economic council of the previous PO government. He will also be one of three deputy prime ministers, with the other two responsible for science and culture, respectively.

Morawiecki will be supported by Pawel Szalamacha and Henryk Kowalczyk, who together co-authored the PiS government's economic policy. Szalamacha is a corporate lawyer by background, co-founded the right-wing economic think tank 'Instytut Sobieskiego' and was deputy treasury minister responsible for the financial sector in the last PiS government from 2005-07. Kowalczyk, who also co-authored PiS economic policy, which included a Funding for Growth scheme similar to the one implemented in Hungary, will be a minister without portfolio.

PiS will be able to take over the Monetary Policy Committee (MPC) of the Bank of Poland, as it will be able to appoint 9 out of 10 MPC members in 2016. The appointment of three moderate economic policymakers, with Morawiecki as an adviser to the previous PO government, suggests, and is perhaps a signal that, the government will not try to push policies that would be considered unorthodox onto the central bank. This would also be consistent with the electorate's preferences since the experience of hyperinflation still lingers in the memories of most voting age people, which would make major changes in the mandate of the central bank costly politically. Nevertheless, given the government's economic objectives, rates are expected to fall to about 75 basis points by the first half of 2016 in response to current deflationary pressures in Poland. Due to these political constraints on the monetary policy side, the government might perceive itself as having greater fiscal space. 

"We expect this economics team to be geared towards protecting the fiscal target of 3% of GDP by being careful about sequencing the changes that are envisioned so that expenditures are funded. However, since revenue forecasts are subject to errors, we see a greater risk of a fiscal mistake", says Barclays.