What about the hundreds of billions from the KPO for Poland? Experts and the market are very optimistic, but there is a threat

The European Commission made funds for Poland conditional on the introduction of the so-called milestones. Even though more than a year has passed, Poland has still not implemented them and even EUR 58 billion (approximately PLN 260 billion) from the KPO is still frozen. A potential victory for the opposition (as indicated by the late poll, although votes are still being counted as of October 16, 2023) may mean the achievement of milestones, which in turn would unlock a stream of money from the European Union.

In a situation where the opposition forms a government, the likelihood of resolving the dispute with the European Commission regarding the rule of law increases. The probability of the inflow of EU funds to Poland, even relatively faster in this scenario, is increasing, as part of the KPO, under the multiannual financial framework

–

What about the money from KPO?

The day after the elections, the zloty strengthened. As economists from the Analysis profile note, this is the result of investors betting that we will finally receive funds from the KPO that will be “exchanged on the market”.

There is agreement among experts on the KPO issue, as analysts from Millennium Bank also expect that the money from the KPO will flow to Poland. “From the economic point of view, the possible implementation of the scenario of the government appointed by the opposition will mean warmer relations with and high chances for an inflow of funds from the EU Recovery Fund for the National Reconstruction Plan, as well as more efficient absorption of funds from cohesion policy. EU funds should support the role of investments. In in terms of fiscal policy, in the short term we do not expect a significant change in emphasis and maintaining pro-social priorities. A more extensive comment on possible changes in economic policy will be possible after the announcement of the final election results, which will show the balance of power in the new parliament” –

Bartosz Sawicki, an analyst at Cinkciarz.pl, shares this enthusiasm, although at the same time he cools it down a bit. “Unlocking financing for the National Reconstruction Plan will support economic growth and contribute to maintaining a favorable situation in the balance of payments. The first reaction of investors is unequivocally positive, but it may weaken. Formation by the Civic Coalition, Third Way and the Left may take up to two months,” writes Sawicki in a comment sent to our editorial office.

In August, he promised that victory in the opposition elections would mean unlocking money from the National Reconstruction Plan (KPO). – Here, in Sopot, my hometown of Sopot, I make a solemn promise that the day after the elections, after the victory, I will go and unlock this money, and we will all feel it – said Donald Tusk during a meeting with voters about funds from the National Reconstruction Plan. – There is only one country in the entire EU that has not received a single euro. This is Poland – reminded the chairman of the Civic Platform, emphasizing that even Hungary received the money.

The National Reconstruction Plan is an investment plan for Poland – prepared by the government and approved by the European Commission. This is part of a huge EUR 806.90 billion plan to rebuild the EU economy after the coronavirus pandemic. Poland received EUR 35.40 billion, most of it in the form of subsidies. During a meeting with voters in Sopot, Tusk calculated that it would be approximately PLN 500 million for each district. Each country had to prepare its own KPO, according to the EU guidelines, for approval by the European Commission and then by the EU finance ministers in the EU Council. At the beginning of September 2023, Poland submitted an application to grant Poland an additional EUR 23 billion in loans from the KPO, so in total we can receive over EUR 58 billion.

2023 election results

We are still waiting for the official Polish parliamentary results, which should finally be released on Tuesday. For now, we are receiving partial data from the National Electoral Commission, but there is already an Ipsos late poll for TVN, Polsat and TVP. It basically confirms the results of yesterday’s exit poll: PiS has the support of 36.6%, Civic Coalition 31%, Trzecia Droga (Poland 2050 and PSL) 13.5%, Nowa Lewica 8.6%, Konfederacja 6.4 percent This means that the opposition collectively has a majority and can form a new government.

On the post-election morning, the zloty strengthened significantly, and our currency increases against the main world currencies at the level of 1.2-1.5%. “The entire sale of the Polish currency caused by the sharp start of rate cuts by the Monetary Policy Council in September has been made up for. EUR/PLN is over 5% below the maximum from a few weeks ago,” writes Bartosz Sawicki, an analyst at Cinkciarz.pl, in a commentary.

– A stronger zloty exchange rate is a natural consequence of this result. In my opinion, there are two mechanisms here. The first: a lower risk premium, i.e. what investors require when investing in assets denominated in PLN – said Jakub Borowski in “Poranek Wyborcza” Gazeta.pl, TOK FM and Wyborcza.pl.