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Poland aims for narrower fiscal deficit in 2015 - government document

By Pawel Sobczak WARSAW (Reuters) - Poland plans to cut its fiscal deficit to 2.5 percent of economic output in 2015, a smaller shortfall than previously planned and currently forecast by the European Commission, a draft government document seen by Reuters showed. Poland, the largest economy in central and eastern Europe, is under the Commission's excessive deficit procedure and has been given until 2015 to cut its fiscal gap to below the target ceiling of 3 percent of GDP. Countries under the excessive deficit procedure must present updates each year on their deficit reduction plans, also called "convergence programmes". Reuters has seen a copy of this year's update for Poland, which must be approved by the government by the end of April and then sent to Brussels. Poland's update for this year, seen by Reuters, showed that last year's general government deficit, calculated using the European System of Accounts 1995 standard, stood at 4.3 percent of GDP. In 2014, Poland expects to jump to a 5.8 percent fiscal surplus thanks to an overhaul of its pension system, and it sees deficits of 2.5 percent in 2015 and 1.8 percent in 2016. The current convergence programme envisages a deficit next year of 2.7 percent of GDP. The European Commission currently forecasts Poland's 2015 deficit at 2.9 percent of GDP. The more ambitious deficit targets signal Poland is more confident about its growth and fiscal revenue prospects. The country had earlier planned to exit the deficit procedure in 2014, but an economic slowdown forced it to revise last year's budget and ask the Commission for more time. Poland has already financed 70 percent of its 2014 borrowing needs, and finance ministry officials said the improving economy could lead to higher than expected fiscal revenues this year. The draft of the document also shows that the government sees economic growth accelerating to 3.8 percent in 2015 from 3.3 percent in 2014. Separately, a government source told Reuters that Poland plans to return to lower value-added tax (VAT) rates in 2017. Poland will also unfreeze the wage fund in the public sector that year. Poland's deficit peaked at nearly 8 percent of GDP in 2010. (Reporting by Pawel Sobczak; Writing by Marcin Goettig; Editing by Hugh Lawson)