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UPDATE 2-Polish 2011 budget outline sees 3.5 pct GDP growth


WARSAW, May 10 (Reuters) - Poland's government has accepted a budget outline for 2011 that assumes economic growth of 3.5 percent, a finance ministry spokeswoman said on Monday. The comments confirmed earlier Reuters reports but also highlighted analysts' concerns that Warsaw's plans to lower its budget deficit to below 3 percent by the end of 2012 may prove too ambitious. In its updated euro convergence plan published in February, the government had assumed growth of 4.5 percent for next year, which would allow more scope for lowering the deficit from its current level of around 7 percent of gross domestic product. "The government... has approved macro indicators for next year in line with the finance ministry's proposal assuming 3.5 percent GDP growth and inflation of 2.3 percent," Magdalena Kobos told Reuters. Poland was the only European Union member to have avoided recession last year, though its debt and deficit levels ballooned because of the economic crisis. It is expected to grow by about 3 percent in 2010, up from 1.8 percent in 2009. "Yes, the difference in the growth forecasts are a concern. We will see what the deficit will be like in the end but the government's plan is not too realistic," ING senior economist Rafal Benecki said. "Everybody is looking these days at fiscal sustainability and from this perspective we are looking good compared with others," he added. Warsaw will prepare another update of its convergence plan for the European Commission by the end of this year. Prime Minister Donald Tusk's centre-right government is reluctant to take swift action to reduce the deficit with big spending cuts or tax hikes ahead of a presidential election due in June and parliamentary polls set for next year. However, Deputy Finance Minister Ludwik Kotecki told Reuters the government had begun a spending review to identify areas where savings could be made. "I have asked all spending ministries to provide detailed data on their expenditure. We will probably finish the review in May," he said in comments authorised for publication on Monday. "There is some risk we may breach the 55 percent level (of public debt to GDP) next year if no measures are taken." Breaching the 55 percent threshold, though low by western European standards, would automatically trigger painful spending cuts under Polish law, something the government wants to avoid. "Next year, we expect a rebound in private investment... We think it will to a great extent compensate for reduced public investment," Kotecki added. (Reporting by Pawel Sobczak and Gareth Jones, writing by Karolina Slowikowska; Editing by Ron Askew) Keywords: POLAND GROWTH/ (karolina.slowikowska@reuters.com; +48 22 653 9725; Reuters Messaging: karolina.slowikowska.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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