Poland's protracted political gridlock suggests low probability of fiscal reforms - S&P
Poland's fiscal imbalances have been growing in recent years, and the protracted political gridlock, anticipated as the outcome of the presidential elections held Sunday, suggests that the probability of fiscal reforms is low, S&P Global Ratings agency assessed in a report.
"The results [of presidential elections - MI ed.] suggest that the country's complex institutional backdrop from the last year and a half will remain in place," S&P pointed out.
"The campaign as a whole underlines our view that the opposing sides in Polish politics remain highly adversarial, and we think that could make policymaking more unpredictable. We also think the implementation of parts of the government’s agenda will continue to prove challenging, not least because of the president's veto powers," it added.
As an example, the agency experts pointed to potential difficulties in rolling back some of the contentious reforms by the previous government led by right-wing socially-conservative party Law and Justice (PiS), particularly reforms affecting the judiciary, and assessed that those efforts might encounter obstacles at the constitutional court.
S&P Global analysts pointed out that although the rating is based on the resilience of the Polish economy, the protracted political deadlock suggests that the likelihood of fiscal reforms is low.
"(...) Polish economy’s remarkable resilience to shocks continues to underpin our ratings. Over the last three decades, the economy's performance has been remarkable, with real GDP increasing threefold despite a slight decline in population. During that period, Poland’s external services position shifted from a balanced position to a surplus of almost 5 percent of GDP, with a balanced overall current account and net external debt to GDP below zero," they stressed.
"This resilience reflects Poland’s diversified economy, its flexible labour and product markets, its educated workforce, and its access to ample non-debt-creating external funding, including EU transfers. Nevertheless, the country's fiscal imbalances have been growing in recent years, and the protracted political gridlock, in our view, suggests that the probability of fiscal reforms is low," they added.
The authors of the report pointed out that the rapid growth in government debt expected through 2028 highlights Poland's rising fiscal risks.
"We forecast that net general government debt (as a percentage of GDP) will rise by almost 10 percentage points between 2024 and 2028, with substantial military investment as a key driver," S&P wrote.
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Karol Nawrocki, a right-wing presidential candidate backed by Law and Justice (PiS) opposition party, secured 51 percent of votes in the presidential election runoff held June 1. Nawrocki will succeed current President Andrzej Duda, whose term expires in August.
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