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Investing.com -- Fitch Ratings has reaffirmed Poland’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ’A-’ with a Stable Outlook on Friday, March 14, 2025. The rating is supported by Poland’s large, diversified and resilient economy, sound macroeconomic policies anchored by EU membership, solid external finances, and a more stable government revenue base than its peers.
Poland has seen a significant fiscal deterioration in recent years, leading to the European Commission initiating an Excessive Deficit Procedure (EDP) against the country in 2024. The general government deficit increased to 6.2% of GDP in 2024, more than double the ’A’ peer median of 2.8%, and above the government’s Medium-Term Fiscal Plan target of 5.7%.
Military spending in Poland rose from 2% of GDP in 2021 to around 4% in 2024, the highest level in Europe according to NATO data. Fitch expects it to rise further to 5% and remain elevated over the medium term, primarily due to significant equipment purchases.
Fitch anticipates a gradual fiscal consolidation, with government deficits expected to decrease at a slower pace than the Polish authorities’ projections. The rating agency forecasts a deficit reduction to 5.0% of GDP by 2026, and a decrease to 3.7% by 2028.
The general government debt increased to 54.3% of GDP in 2024 from 49.7% in 2023. Fitch predicts that continued primary deficits and net issuance of guarantees will push debt to 61.6% in 2026 and forecasts government debt/GDP to stabilize at 64% in 2028.
Poland’s real GDP growth accelerated to 2.9% in 2024, up from 0.1% in 2023, driven by consumption and fixed investment. Fitch predicts growth of 3.1% in both 2025 and 2026, as the impact of US tariffs on the eurozone growth outlook will be largely offset by domestic consumption, and EU funds.
The current account (CA) surplus decreased to 0.1% of GDP in 2024 from 1.8% in 2023, due to a shift in the trade balance to a deficit of 0.8%. Fitch forecasts a modest CA deficit of 0.6% and 0.7% in 2025 and 2026, respectively.
Annual inflation averaged 3.7% in 2024 and rose to 5.3% year on year in January 2025 from 2% in March 2024. In light of higher inflation, Fitch expects two 25bp policy rate cuts in the second half of 2025 and four 25bp cuts in 2026.
Political challenges remain, including institutional clashes and divergent priorities among coalition parties. Presidential elections are due in May 2025, with parliamentary elections in 2027.
Poland has an ESG Relevance Score of 5[+] for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality, and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in Fitch’s proprietary Sovereign Rating Model.
Factors that could lead to a negative rating action include a failure to consolidate public finances or materially lower medium-term growth prospects. On the other hand, fiscal consolidation over the medium term, significant improvement in governance quality, or sustained higher GDP growth could lead to a positive rating action.
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