Even though accession entails acceptance of the objective of EMU, compliance with the convergence criteria is not a precondition. The crisis in Russia has led to a downturn in the high growth rates Poland had been seeing over the last three years. The financial sector has withstood the crisis and the Polish currency has stayed within the broader fluctuation band despite several sharp drops. Inflation edged up in the final months of 1999. Poland has also lowered its interest rates on several occasions.
Real rates remain high owing to nagging inflationary trends.
The economic slackening off is curtailing efforts to cut the budget deficit, which is also hampered by rather limited tax revenue. The Polish authorities have started implementing a series of major social and structural reforms in several areas, together with an ambitious privatisation programme. However, in the short term these reforms will take up a considerable share of the budget. Poland has stated that it accepts the EMU acquis in its entirety and will be putting the necessary administrative structures in place to see that it is applied. As regards the part of the acquis that has to be implemented before accession, Poland adopted a Public Finances Act in November 1998.