The plan is to increase defence spending by 2.6% of GDP. With $17bn of new contracts with the US and South Korea, they’ve already hit 2.5% of GDP. ALL of that money flows abroad!
Poland’s current account has collapsed into deficit this year. In the last two quarters it averaged 4% of GDP. That large a deficit is difficult enough to fund for a rich country like Britain or even the United States.
Now add on the 2.5% of GDP being spent on weapons and we get to a 6.5% of GDP current account deficit. In a relatively poor Central European country with its own currency
But wait, there’s more! Poland’s inflation is close to 20%. 20%! They’re in the same territory as Argentina and Turkey were prior to both entering an inflation-depreciation doom loop.
The zloty has declined 12% this year against USD. That’s nothing in compared to what’s coming. If you think a relatively poor country with an inflation rate over 10% higher than the US and a current account deficit of 6.5% of GDP can survive for long I’ve got a bridge to sell.