The proposals, which were announced a few months after the election of the Law and Justice Party (PiS) late last year, would bring the retirement age back to 60 for women and 65 for men. It represents a reversal of measures under the previous government to raise retirement gradually to 67 for both sexes.
The fund said that, with Poland’s rapidly ageing population and no plans to offset its effects, the move would result in increased risk of old-age poverty, higher reliance on social benefits and adverse implications for the budget.
“Moreover, it would reduce labour force participation at a time when potential growth is already threatened by unfavourable demographic trends,” the IMF said.
Earlier this week, ratings agency Moody’s changed Poland’s outlook from “stable” to “negative”, citing the age-related costs that would be triggered by the changes as one reason.
Still Poland managed to avoid being hit with a downgraded rating from Moody’s, which had been a concern after Standard & Poor demoted the country in January this year.
S&P said it had downgraded Poland due to the substantial erosion of institutional checks and balances, which the IMF also highlighted in a statement following its most recent review of the Polish economy yesterday.
“A weakening of some institutions and policies... could worsen investor sentiment and hinder economic expansion,” it said.
Since its election victory in October last year, critics argue the PiS’s rapid changes, have rendered the constitutional court effectively redundant, restricted media freedom and eroded the pillars of democracy the nation has built over the last quarter century.
Poland has one of the largest and most dynamic economies in the European Union, enjoying enormous economic success over the last 25 years. For the last eight the country was governed by the Civic Platform party.
But observers worry the rise to power of PiS could derail the nation’s good track record.
Plans to relax public spending limits and roll out a costly social benefit initiatives, resulting in a fiscal deficit of 3.2% of gross domestic product and billions more in expenditure, have triggered wide-spread concern about Poland’s public finances.
