S&P Global Ratings has shifted Poland’s long-term credit outlook to negative, citing "one of the most significant fiscal deteriorations globally." The agency simultaneously lowered its local currency ratings from A/A-1 to A-/A-2. This move follows similar actions by Fitch and Moody’s, which placed Poland on negative outlook last year and cut its rating in September this year to its lowest level since 2002.
Fiscal deterioration and political constraints
The core issue is the ballooning budget deficit, driven by an expanding defence budget after Russia’s invasion of Ukraine and rising social spending. Last year’s deficit hit 7.3% of GDP, the second-highest in the EU. While finance ministry projections forecast a slight drop to 6.7% this year, next year’s budget foresees a rebound to 7.1%. These figures vastly exceed the 3.7% target set when Poland entered the EU’s excessive deficit procedure in 2024. S&P projects net debt will exceed 70% of GDP by 2029, a rise of more than 20 percentage points over five years.
Political polarization hinders consolidation. Parliamentary elections in 2027 make meaningful adjustment unlikely before then. President Karol Nawrocki holds veto power, creating constraints for the government’s legislative agenda. S&P warns that renewed institutional tensions around the constitutional court could weigh on policy predictability. Despite these risks, the economy remains resilient with real GDP growth projected at 3% between 2027 and 2029.
Government response and opposition blame game
Finance minister Andrzej Domanski acknowledged the downgrade but pointed to presidential vetoes as the primary constraint. He stated, "Despite the presidential vetoes, we will continue taking steps to strengthen the country’s finances." Nawrocki countered that the deficits preceded his term, blaming Prime Minister Donald Tusk for budgetary "chaos" and a "deep crisis of credibility." Marcin Ociepa, deputy head of the Law and Justice caucus, accused the government of shifting responsibility onto the president. He argued that any family managing finances like Tusk does would drown in debt.
| Metric | Value/Projection |
|---|---|
| Local Currency Rating | A-/A-2 |
| Deficit (Last Year) | 7.3% of GDP |
| Deficit Forecast (This Year) | 6.7% of GDP |
| Net Debt Projection (2029) | >70% of GDP |
The agency noted that elevated deficits constrain policy flexibility against future shocks. This exposure may necessitate sharp fiscal adjustments that would weigh on economic growth. I see no path to rapid recovery given the 2027 election cycle. The current trajectory clearly favors political maneuvering over fiscal discipline.
