Moody’s affirmed Poland’s “A2” credit rating but retained a negative outlook, citing growing risks to public finances and a lack of fiscal consolidation.
Poland’s Credit Rating: Moody’s Assessment
Moody’s has maintained Poland’s credit rating at “A2” while keeping the outlook negative, signaling continued economic stability alongside increasing risks to public finances.
This decision aligns with a broader trend of caution from rating agencies regarding the Polish economy. Maintaining the “A2” rating indicates Poland remains a credible borrower, but the lack of outlook improvement suggests a rating upgrade is unlikely in the near future.
Fiscal Deficit and Public Debt Concerns
The negative outlook serves as a warning: further deterioration in the fiscal situation could lead to a rating downgrade. Moody’s emphasizes a balance between a relatively strong economy and escalating threats to public finances.
Similar stances are held by other agencies, with Fitch and S&P also maintaining a “A-” rating for Poland, with Fitch also indicating a negative outlook, presenting a consistent picture of solid economic foundations but growing fiscal risks.
Deteriorating Fiscal Forecasts
A key reason for the negative outlook is the worsening forecasts for public finances. Moody’s indicates that a lack of clear fiscal consolidation could weaken state stability and limit the effectiveness of economic policy.
The agency projects the government and local government sector deficit to reach a specific level (data not provided in source).
Despite a gradual decline, the deficit remains high relative to EU fiscal rules. Greater concerns arise from the trajectory of public debt, which Moody’s predicts will increase, systematically increasing burdens on the budget, particularly regarding rising debt servicing costs due to sustained high global interest rates.
Economic Growth and Risks
Despite the fiscal concerns, Poland’s economic dynamics are a positive factor. Moody’s has raised its GDP growth forecast for Poland in 2026 to 3.7% (from 3.2%). This growth is expected to be driven by domestic demand and EU-funded investments.
However, the growth rate is projected to slow to around 3% in 2027 due to the phasing out of funds from the National Reconstruction Plan and weaker consumption.
The agency notes that risks to these forecasts are tilted downwards, with key threats including global economic slowdown, geopolitical tensions, and domestic political factors.
Political Factors and Geopolitical Risks
Moody’s pays particular attention to political factors, noting that the impasse between the government and the president, evident in legislative disputes, could hinder the implementation of fiscal reforms.
The upcoming 2027 parliamentary elections also pose a risk, potentially leading to increased public spending and a further deepening of the deficit. Potential delays in utilizing EU funds, particularly due to the president’s veto of the SAFE program, could limit the inflow and effective use of these funds (amounting to €43.7 billion).
The geopolitical situation is also a significant risk factor, with Poland’s position as a NATO and EU border state making it vulnerable to regional tensions. While a direct military conflict between NATO and Russia is not the baseline scenario, any serious military incident on Polish territory would result in an immediate rating downgrade.
Conditions for Rating Improvement
Moody’s identifies specific conditions that could lead to an improvement in the rating outlook. A credible fiscal consolidation plan, including limiting debt growth and improving debt servicing indicators, is crucial.
Positive assessments would also be given to institutional reforms strengthening judicial independence and the stability of the legal environment for investors, increasing market confidence and improving long-term economic prospects.
Conversely, a lack of control over spending and continued debt growth could lead to a downgrade. Maintaining pressure to increase social and investment spending without parallel revenue-side measures poses a serious threat to the stability of public finances.