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Investing.com -- Fitch Ratings revised Poland’s credit outlook to Negative from Stable on Friday, while affirming the country’s long-term foreign-currency issuer default rating at ’A-’. The move underscores growing concerns around fiscal slippage and political headwinds that are expected to complicate efforts to rein in public debt in the coming years.
The ratings agency cited deteriorating public finances and rising deficits as key drivers behind the revised outlook. Fitch now projects deficits to average 6.7% of GDP between 2024 and 2025, as Poland contends with rising expenditures on public wages, pensions, defense, and debt servicing.
Official data show the fiscal deficit in 2024 widened to 6.6% of GDP, overshooting both the government’s target of 5.7% and Fitch’s earlier forecast of 6.2%. Government spending rose to nearly 50% of GDP, up from 43.6% in 2021, driven by rigid expenditure commitments and mounting military allocations.
Looking ahead, the deficit is projected to stay elevated, at 6.9% in 2025 and 6.8% in 2026, well above the ’A’ median level of 2.9%. Even with measures such as freezing income tax thresholds and moderating future salary growth, Fitch expects only marginal deficit reduction through 2027.
General government debt is forecast to rise sharply, reaching 68.3% of GDP by 2027, compared with 49.5% in 2023. “We expect Poland’s interest payments to rise from 5.1% of government revenues in 2024 to 7.2% in 2027,” Fitch said, pointing to high future financing needs and continued primary deficits.
Political dynamics further complicate the outlook, with increased veto activity from President Karol Nawrocki and resistance to fiscal tightening. The impasse within the coalition government has already derailed attempts at tax reform, and upcoming elections in 2027 are expected to limit appetite for austerity measures.
Despite fiscal pressures, Poland continues to benefit from resilient macroeconomic fundamentals and a robust external position. Fitch forecasts real GDP growth to average 3.2% in both 2025 and 2026, outpacing peers, supported by domestic demand and increased absorption of EU funds.
External buffers also remain strong, with international reserves expected to reach $249 billion by year-end, covering more than five months of external payments. However, Fitch warned that without a credible adjustment plan, Poland’s debt trajectory could compromise future rating stability.