Size of government in Poland is not excessive in comparison with more developed European countries, with total government spending reaching 42% of GDP in 2017. Growth has accelerated in 2017 from 2.9% to 4.6%, on the base of increased consumption and investments from EU funds, and unemployment rate fell below 5%. Although budget deficit just below 2% of GDP is still recorded, the gross public debt is on a slow downward spiral, reaching 51% of GDP in 2017. Further fiscal austerity is therefore necessary, not only to mitigate pro-cyclical fiscal policy, but also to create buffers from future increase in spending due to demographic changes. Although a thorough privatization process took place during the 1990s, the government still owns and operates numerous enterprises in various sectors of
the economy. SOEs have a more pronounced role in the economy of Poland than in any other OECD country, especially in the banking sector, where the state controls two biggest banks and several smaller ones. Furthermore, state run Polish Development Fund was set up in early 2017 with the aim of supporting investments in the country. SOEs are also present in transport, chemical, mining and energy industries. Some of these companies do not operate efficiently, relying on direct funding from the state for their operation, via subsidies (most notably the mines), and there are currently no plans for broader privatization. Although SOEs are, legally, not favoured against private companies, there are strong indications of actual government favouring of state controlled companies in those sectors which are perceived as strategic and are providing them with pecuniary and political support. Income tax is progressive, with the lower rate at 18% and the higher one at 32%, applied above a moderate threshold. Corporate rate is 19%, while VAT level is set at 23%, with privileged rates of 5% and 8% for some products. High social security contributions and some excessive labour law regulation have led to a high share of non-fixed temporary working contracts among the working population, because of a lower social contributions scheme and less strict regulation applied to them. Total labour tax wedge is below those of other European OECD countries, standing at 35.6% on the average wage.