Fitch Ratings, the global rating agency, has affirmed Poland’s long-term foreign currency rating at A- with a stable outlook.
The rating is supported by Poland’s diversified economy, strong macroeconomic framework, and lower public debt levels compared to similar-rated peers. However, governance indicators and income levels are relatively lower than the ‘A’ median.
Fitch has identified several potential factors that could lead to a downgrade, including increased government debt, deteriorating governance, strained EU relations, and challenges to competitiveness due to high inflation or energy prices. The rating could improve with fiscal consolidation and evidence of sustained GDP growth.
Fitch has raised concerns about the upcoming elections in Poland, which could result in additional fiscal pressures. They have also highlighted plans to increase childcare benefits, potentially impacting public finances.
The agency expects Poland’s public deficit to decrease to 3.7 percent of GDP in 2024, potentially triggering the Excessive Deficit Procedure if EU fiscal rules are reinstated. While the elections are unlikely to significantly affect macroeconomic stability or investment attractiveness, they could have implications for Poland-EU relations, the pace of EU fund disbursement, and rule of law issues.
Fitch forecasts a deficit of 5.3 percent for the Polish general government sector in 2023, exceeding the ‘A’ median. Persistent fiscal deficits are expected to push the public debt to GDP ratio beyond 50 percent by 2023 and 53 percent by 2027. Uncertainty surrounds the disbursement timeline of EU Recovery and Resilience Facility funds due to pending judicial reforms. Fitch expects funds to be unlocked by the end of the year but acknowledges rising risks if the process faces further delays.
The agency projects mid-term growth at 3-3.5 percent, driven by investment dynamics, productivity, and easing inflation. Moody’s rates Poland at ‘A2’ while S&P aligns with Fitch at ‘A-‘ with a stable outlook. S&P did not release a scheduled report, and the Fitch rating review completes the spring round of reviews. Moody’s next rating review is scheduled for September 22.