The new Goldman Sachs Macro Research report draws attention to the fact that, despite some fiscal relief, changes in the Polish pension system might entail the risk of reduced bond market liquidity and equity price uncertainty. The plan is now to transfer more than 50% of second-pillar pension fund portfolios to the first pillar and thereby reduce public debt.
Maddalena Polan, senior European economist and the report’s author, said that “the impact on long-term fiscal sustainability will be small”, meaning that gross liabilities will not change as much as net debt will decline. The report also points out that, as a result, “the Polish bond market will be even more sensitive to changes in global risk sentiment, with potential repercussions for Zloty and FX reserves volatility”, depending on how many people stay in the second pillar and future fund investment strategies.
Although market valuations (do you mean ‘fluctuations’) may not necessarily happen, the report points to Hungary’s experience following its appropriation of second pillar assets, which can show the potential fall in liquidity as happened inthe Polish case.
Please read the Investment & Pensions Europe article here.