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Poland eyes lower-than-planned 2022 deficit, says finance minister

A construction site with a demolished building is seen near skyscrapers in the centre of Warsaw

By Pawel Florkiewicz and Alan Charlish

WARSAW (Reuters) - Poland's 2022 deficit could be lower than expected, the finance minister told Reuters, adding that no amendment to the budget was planned despite surging inflation that makes the forecasts it was based on look like something from a "different economic reality".

Poland is spending billions on measures to soften the blow of higher prices for households, as well as on supporting refugees fleeing the war in Ukraine. The influx of people from its neighbour has nevertheless helped support consumption and economic growth.

"We will see what the execution of the budget looks like in the coming months, but at the moment we do not plan to amend the budget for 2022," Magdalena Rzeczkowska said in an interview.

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"It seems that this year's budget deficit may even be lower than the forecast level of 4.3% of GDP."

Rzeczkowska said gross domestic product growth would be higher than forecast in 2022, and that the ministry expected it to be over 5% in the second quarter.

In the convergence plan it sends to the European Commission every year, Poland's finance ministry forecast inflation of 9.1% in 2022. But with price growth hitting a 25-year-high of 15.5% in June this estimate will have to be revised, Rzeczkowska said.

"We hope that (the peak of inflation) will take place in the summer months and that the situation will stabilise later," she added.

Analysts polled by Reuters in June forecast average inflation of 13.2% in 2022.

One factor boosting inflation is the fall of the zloty currency, which has shed around 5% since the beginning of June. Rzeczkowska said the finance ministry was active in the market to support the currency.

"We constantly exchange currency funds at our disposal, including funds from the EU, depending on our needs and the market situation," Rzeczkowska said.

Some economists have said Poland is heading for two consecutive quarters of contraction this year, often termed a "technical" recession. Analysts have also raised the possibility of a stagflation scenario of high inflation and slow growth.

Rzeczkowska, said the risk of a technical recession was "moderate", but that she did not see a risk of recession next year or of stagflation.

(Reporting by Alan Charlish; Editing by Catherine Evans)