CASE Highlights
Trade, Innovation, and Productivity
On June 24, the EU adopted new sanctions on Belarus following an escalation of human rights violations, violent repression of civil society, and the recently forced landing of a Ryanair flight in Minsk. The sanctions will target technology and software industries, dual-use goods, technology, tobacco, petroleum, potash products, and financial services. Thus, the EU imposed import restrictions on petroleum and potassium chloride products originating in or exported from Belarus as well as limitations on the EU the supply or export of goods used in the production of tobacco products to or for use in Belarus. In addition, access to the EU capital markets will be limited and European banks will not provide insurance or re-insurance to the Belarusian government or other public bodies and agencies. Finally, a licensing obligation was imposed on the sale, supply, transfer, or export to or for use in Belarus of various equipment, software, and technology for telecoms interception and monitoring. These sanctions may have significant adverse impact on the Belarusian economy. In fact, Belarus has an estimated 20% of the world potash reserves with export to the EU accounting for up to 8% of country’s total potash export revenue in 2020. As of May 2021, Belarus export of petroleum products targeted by the new EU sanctions amounted to USD 1.5 billion with ca. 50% of the sales value being attributed to the EU alone.
Labour Market and Environment
The latest edition of the D+ survey in Poland discovered population concerns on the current pandemic situation, concerning, in particular, on health security, labour market, and socialisation. While about half of the respondent shared a rather positive outlook on the labour market situation in Poland and feeling of control over one’s employment situation, the feeling of loneliness and loss of social bonds seem to be among the lasting effects of the pandemic. Thus, compared to 2010, much fewer respondents (ca. 10 pp fewer) believed that they have someone to rely on and a much greater share of people declared that they lack people around them (ca. 20 pp more). The extended periods of stress and uncertainty as well as lockdown fatigue are among the main factors contributing to lower levels of well-being during the pandemic. The ongoing vaccination campaigns and easing of the lockdown measures throughout the EU are set to support not only business activities and economic recovery but also psychological and social aspects of the pandemic.
Macro and Fiscal
On May 15, the ruling party in Poland (Law and Justice, PiS) presented the assumption of the “Polish Deal” (Polski Ład) - an economic plan designed to support Poland’s post-pandemic recovery. Among other measures, quite substantial changes in the Personal Income Tax are envisaged. The new system with higher tax thresholds but inability to deduct public healthcare contributions from the tax base public and special adjustment for middle income taxpayers will have a substantial impact on the distribution of tax wedge. The changes will increase progressivity of the system increasing the effective tax rate for ca. 12% of high-income taxpayers and majority of the self-employed. In addition to the distributional impacts, the change will have a range of other repercussions. According to experts, these include unnecessary impact on the transparency of tax rules and related compliance costs, and will not reduce poverty rates among the most vulnerable groups.
