Poland likely to face debt stabilisation challenges without further fiscal consolidation – Fitch
Without additional measures, reducing the gg deficit below 3 percent and stabilising debt at levels comparable to Poland’s peers will be difficult, the analysts at Fitch rating agency assessed in Thursday's report.
"The government’s predominantly backloaded consolidation plan relies on smaller-scale initiatives. Without additional measures, reducing the deficit below 3 percent and stabilising debt at levels comparable to Poland’s peers will be difficult," Fitch said in the report.
"We recently raised our 2025 deficit forecast to 6.6 percent of GDP (from 5.9 percent in the March Data Comparator) reflecting the higher 2024 deficit, increased political challenges and an absence of additional fiscal measures," it added.
The experts recalled that the agency expects Poland's deficit to fall to around 4 percent by 2028, with only minor consolidation in 2027 due to parliamentary elections.
"We project government debt to rise to 64 percent by 2027, from 55 percent at end-2024, widening its gap above the ‘A’ median and reducing headroom at the current rating level," they wrote.
In Fitch's assessment, key question is the government’s policy response if fiscal deficits continue to miss targets, particularly amid the trade war, US policy uncertainty, the impact of fiscal measures on domestic demand and the difficult political environment.
As the experts pointed out, the outcome of presidential elections in Poland could exacerbate political uncertainty and institutional clashes and continue to challenge the government’s capacity to implement fiscal consolidation and economic reforms.
"The outcome of the presidential election will add to pressures on the cohesion and stability of the governing coalition, notwithstanding its winning a vote of confidence on June 11. Political considerations are also likely to reduce the room to implement unpopular measures, including those supporting fiscal consolidation, ahead of parliamentary elections due by October 2027," they assessed.
Of the three largest rating agencies, Poland has been given the highest credit rating by Moody's, at ‘A2’. Fitch and S&P rate Poland at ‘A-’, one level lower than Moody's. The outlook for all ratings is stable.
Fitch's next review of Poland's rating is scheduled for September 5.
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