Trade, Innovation, and Productivity
According to the latest European Commission forecasts published on July 7, the EU economy will return to its pre-pandemic level in the last quarter of 2021 or one quarter earlier than expected in the previous forecast. This shows an expected higher EU economic growth compared to the spring projections. According to the new forecast, the EU economy will grow by 4.8% in 2021 and 4.5% in 2022. The improvements in growth prospects can be attributed to the progress made in vaccination and other virus containment strategies that led to a revival of economic activity. However, the inflation rate is expected to reach 2.2% in 2021 and 1.6% in 2022, which are respectively 0.3% and 0.1% higher than projected by the spring report. The new forecast also records the economic sentiment indicator (ESI) in May 2021 at the highest level since February 2018 – which implies a high optimism among consumers and businesses about the EU economy.
In Poland, the economic growth is expected to reach 4.8% and 5.2% in 2021 and 2022, a rate comparable with other countries in Central and Eastern Europe. Therefore, compared to the spring forecast, Poland's economic growth rate is expected to be relatively higher in 2021 (above 0.8%) and lower in 2022 (0.2%). Poland's inflation rate – the second highest in the EU after Hungary in both 2021 and 2022 – is projected at 4.2% for 2021 with a drop to 3.1% in 2022.
Labour Market and Environment
On July 14, the European Commission unveiled the “Fit for 55” plan – a main tool for achieving the target of reducing emissions by at least 55% by 2030 (with 1990 as a benchmark) and achieving climate neutrality in 2050. Among other things, the package consisting of 13 detailed legislative proposals and following assumptions for the period starting from 2035: (i) 40% of energy will come from renewables while the overall energy consumption will decrease by 9%; (ii) stricter national emission reduction targets in the transport, agriculture and construction sectors will need to be in place; (iii) all new registered cars will be emission-free; and (iv) free allowances will disappear in the European Union Emissions Trading System (EU ETS) and countries will be obliged to spend 100% (currently 50%) of the ETS revenues on the energy transition.
Despite much criticism from climate-oriented organisations for not being ambitious enough in certain proposals, there are also some voices supporting the EC’s initiative. The later are particularly relevant when the Polish perspective is considered as the package meets the needs of Poland in many ways, especially when it comes to providing additional funds for transformation. These include an enlarged Modernisation Fund and a new targeted social fund that targets to eliminate energy poverty.
Macro and Fiscal
On July 1, 132 countries, including Poland, issued a joint statement regarding the new rules of taxation of the, so-called, "Digital giants". The announcement follows more than two years of work at the OECD as part of the project against tax base erosion. The first part of the consensus refers to the world's largest digital corporations. These companies will be determined based on the volume of revenues (above USD 20 billion) and profitability (above 10%). Multinationals that meet these criteria will have to partially reallocate their residual profit, i.e., excess profit, to countries where they sell goods or provide services. The second part deals with the introduction of a minimum global tax of at least 15% of the effective rate. Tax mechanisms created to achieve this goal will apply to those international companies that have achieved global, consolidated revenues of at least EUR 750 million.