Morningstar DBRS confirms Poland at "A", changes trend to negative
Morningstar DBRS has confirmed Poland's long-term foreign and local currency issuer ratings at "A", changing the trend to negative from stable, the agency said in a statement.
"The trend change to negative reflects a deterioration in Poland’s public finances. Higher expenditure on social benefits, public sector wages, and defence has not been offset with higher revenues, thereby contributing to a larger structural deficit", the agency said.
"The IMF projects fiscal deficits of 7.0% of GDP in 2025 and 6.7% in 2026. Prospects for significant fiscal consolidation prior to the next elections in late 2027 appear to be limited given the political gridlock, and fiscal rules have become more permissive in the near term. As a result of large deficits and higher interest costs, the public debt burden is expected to be on an upward trajectory over the next few years, with the public debt-to-GDP ratio surpassing 70% of GDP by 2028. Notwithstanding public finance challenges, Poland’s near-term growth outlook is robust. The economy is expected to expand on average by 2.9 pct over the next three years", it added.
Morningstar DBRS could downgrade the credit ratings: (1) in the absence of a fiscal adjustment that materially improves the public debt outlook; or (2) if medium-term economic growth prospects diminish.
As stated, the trend could return to stable if the country’s fiscal results outperform current expectations.
Morningstar DBRS could upgrade the credit ratings if: (1) fiscal consolidation sets public debt on a sustained downward trajectory; and (2) structural reforms result in an improvement of domestic institutional quality and lead to a convergence of income levels to the EU average.
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