poland’s Credit Rating Outlook Downgraded: A Warning Signal for Public Finances
Warsaw, Poland – Fitch Ratings recently shifted its outlook on Poland’s long-term credit rating to negative, maintaining the A- rating but signaling growing concerns over the nation’s public finances. This move, highlighted by analysts at Credit Agricole, is particularly noteworthy as Fitch has historically been more conservative in its assessments of Poland compared to other major rating agencies like Standard & Poor’s and Moody’s.
the downgrade reflects a deteriorating fiscal situation. Fitch projects a government and local government sector deficit of over 6% of GDP in the coming years – significantly higher than previous government plans and agency forecasts. In 2024 alone, the deficit reached 6.6% of GDP.
Rising Expenses, Limited Adaptability
Credit Agricole points to a key challenge: dwindling fiscal flexibility. Increasing expenditures in critical areas - national defense,social benefits,public sector wages,and debt servicing - are limiting the government’s ability to consolidate its budget.
Adding to these pressures are political factors. The report notes that presidential vetoes of certain legislation and resistance to tax increases are hindering efforts to improve the contry’s financial standing, particularly in the lead-up to elections.
A Shift in Outlook
This change in outlook from Fitch is being viewed as a significant warning. While Standard & Poor’s downgraded Poland’s rating back in 2016, and Moody’s shifted its perspective to negative in the same year, Fitch had consistently maintained a stable outlook.
“Therefore, changing the perspective by Fitch – which in the past was rather considered an agency less prone to swift negative reactions - in our opinion, it is an crucial warning signal in the context of the situation of public finances,” Credit Agricole experts state.
Widening Deficit projections
The situation appears to be worsening. The 2024 deficit proved to be substantially larger than initially anticipated. Current estimates for 2025 also reveal a growing gap between government expectations (6.9% of GDP) and previous forecasts (around 6.3% as of April 2024). The Ministry of Finance anticipates significantly lower state budget revenues in 2025, further exacerbating the problem.
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