There will be no more shields – declares Paweł Borys, president of PFR

The economic situation is stable and does not require – at least at present – such a large scale of public aid as in the second quarter. I do not think that this is the moment when additional support is needed – says Paweł Borys, president of the Polish Development Fund (PFR) in an interview with Business Insider Polska. He adds that the earlier aid was supposed to protect companies for a long time, and it did. But decisions on further or stronger support are left to the discretion of the government, and it will be up to the government to consider whether the aid is necessary.

• The president of PFR admits that public debt and deficit increased during the implementation of the shield. However, the alternative was massive company bankruptcies and a leap in unemployment
• He adds that the cost for the budget in such a scenario would also be there, only with a huge social cost at the same time
• It ensures that the economy is prepared for the second wave of the pandemic. So far, we are going through this crisis as safely as possible compared to other countries. Although it must be remembered that many people face many challenges
• You can find more such stories on the Onet.pl homepage

Ela Glapiak, Business Insider Polska: The government assures that there will not be another lockdown, but the situation we are observing leads to the fact that the vast majority of the country is covered by the red zone. This will affect the functioning of enterprises and the economy. Can companies count on any support, new shields, financial aid?

Paweł Borys, president of the Polish Development Fund: Indeed, unfortunately the second wave of the pandemic in Europe has become a reality and in most countries the incidence is growing exponentially. Therefore, the priority is again to protect health and ensure the efficiency of the health service. In this situation, the introduction of new restrictions is justified in order to lower the virus transmission rate. But Prime Minister Morawiecki presented in the strategy that the restrictions are also to have a possibly limited impact on the economy, which currently precludes a full lockdown. It is important that the economic rebound in the third quarter was very dynamic and we are entering the current wave of the pandemic with economic activity at the level of approx. 95%. before COVID-19, a stable labor market, an increase in corporate deposits by over PLN 50 billion and a large trade surplus. It shows that the economic situation is stable and does not require – at least at present – such a large scale of public aid as in the second quarter. I do not think that this is the moment when additional support is needed.

Earlier aid was supposed to keep companies safe for a long time, and it did. But decisions on further or stronger support are at the discretion of the government, and the government will consider whether the aid is necessary. Public finances are under control and, in my opinion, there is room in the budget for such activities.

You have reported that a quarter of the funds from the financial shield have not been allocated, can it happen now?

In March, the government declared really significant funds for the entire anti-crisis shield, even over PLN 200 billion, taking into account budgetary resources, the COVID19 fund, ZUS, PFR, or BGK guarantees. The current estimates show that funds for job protection, business support, health care and public investments were spent of PLN 142 billion plus approximately PLN 20 billion in guarantees. Previous the cost of the shields is therefore about PLN 40 billion lower. I would like to point out, however, that from the very beginning, government support programs were not about spending as much as possible, but about reaching everyone who needed this help, and I am convinced that it has been successful.

More than 345,000 companies received support from the PFR financial shield for SMEs in the amount of PLN 61 billion – in this way we protect approx. 3.2 million jobs. When designing the program, we assumed that the pandemic would have a longer impact on the economy, hence these funds were immediately significant and should secure companies and financing jobs at least until the end of the year. And I think it is real, taking into account the fact that over PLN 50 billion has been added to corporate accounts in recent months, which is now a safe liquidity buffer.

Of course, there are sectors that constitute approx. 10 percent. economies that are more severely affected by the effects of a pandemic, such as culture, hotels in large cities, gastronomy and the aviation industry. There are also regions where the scale of restrictions is greater. The government acts here on a spot basis and introduces support aimed at these sectors – such as a tourist voucher. We, as PFR, are constantly implementing the financial shield program for large companies. At the moment, no government decision has been made as to whether to release additional funds from PFR. If necessary, we are ready to continue.

What about the PLN 40 billion you haven’t spent?

It’s not like we didn’t spend so we keep that money in our pocket. We sold bonds all the time, adjusting the issues to the demand. So far, we have issued a bond for PLN 62 billion to support small and medium-sized companies, funds for large enterprises are being distributed, which we estimate will amount to PLN 10-15 billion. However, we will constantly monitor the demand and adjust the emission to the demand reported by the companies.

From May, companies will start to return the funds they received as part of the support, what will happen to them? The bonds are due for redemption in the following years, so it is time to use the money in some way …

The bonds will mature gradually, as we have issued 4, 6, 8 and 10-year securities. From the moment the companies start paying off the part of the support that will not be redeemed, we will accumulate amounts for which we will then redeem the bonds. There is, of course, the possibility of early redemption – but we will make such a decision possibly in due time.

And this money will be idle on the account? After all, they can be used for another purpose, e.g. for repeated support for companies?

Larger amounts will only be accumulated one year after the repayment begins, then you will be able to think about early repurchase. The money cannot be used for any other purpose, as it would be inconsistent with the terms of the bond issue.

I would like to remind you that, according to the rules of our program, companies will be employed can count on the redemption of subsidies up to 75 percent. in the second quarter of next year. This is a very strong incentive to keep jobs. The remaining part is to be repaid in the next 2 years. The PFR agreement with the government provides that the funds from the repayment of the subsidies will be used to repay the PFR bonds issued to finance the program.

Experts emphasize that the shields have done a lot of good, but there are also many critical voices about the pace of funds distribution and a significant increase in debt.

In total, from the entire government anti-crisis shield, over PLN 142 billion, i.e. about 6.5 percent, went to the economy very quickly. GDP. This is a very significant support that stabilizes the labor market and the enterprise sector now and in the coming months. We paid the funds from PFR within 48 hours. In my opinion, the scale of these measures is neither too small nor too large. Because I do not agree with criticism that public debt and the deficit have increased. The alternative was massive company bankruptcies and a leap in unemployment. The cost for the budget in such a scenario would also be there, only with a huge social cost at the same time. The scale of the intervention must be adequate. Polish public finance, despite the jump in the deficit, is stable, which is confirmed by the ratings of rating agencies and the historically low and even negative bond yields. Aid is currently sufficient, but the second wave of the pandemic is another challenge, you should monitor the situation and be ready for possible additional support if necessary.

I emphasize that large companies can apply for help all the time. As part of the fifth target, the government provides new solutions, a large part of instruments, such as BGK guarantees, is still in place, so the liquidity cushion is solid.

What shield effects are you counting on now, a few months after their launch. How many companies have actually managed to help?

The main goal of protecting jobs has been achieved. We have one of the lowest unemployment rates in the world, although activation remains our long-term challenge. We mainly supported micro, small and medium-sized companies, and the large ones are doing quite well. The economy is prepared for the second wave of the pandemic. So far, we are going through this crisis as safely as possible compared to other countries. Although it must be remembered that inMany people face many challenges. These are often dramatic situations. We must show solidarity, help and at the same time adapt to the new environment as quickly as possible.

How do you think this year will end, how will the Polish economy end it?

Before the impact of the second wave of the pandemic, there was a chance for a minimal decline in GDP of 2-3%. Currently, there is a risk that it will be more in the range of 3-5%. Assuming no lockdown, I would assume, however, that the second bottom of this crisis in Q4 will be quite shallow with a decline in economic activity in relation to Q2 of 2-3%. I am convinced that, compared to other countries, we will end this year with one of the lowest decline in GDP, and next year will bring stability and a solid economic rebound. We must tackle the pandemic together. Our daily discipline in wearing masks or social distance has a big impact on this. By protecting our health, we protect others and also our own workplace and the entire economy.

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