Finance
Polish gridlock puts belt tightening efforts at risk, ratings agencies warn
Published by Global Banking & Finance Review®
Posted on June 4, 2025
2 min readLast updated: January 23, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on June 4, 2025
2 min readLast updated: January 23, 2026
Poland's fiscal stability is at risk due to political gridlock following Karol Nawrocki's election win, warn ratings agencies.
By Gergely Szakacs and Marc Jones
WARSAW/LONDON (Reuters) -Poland's sovereign credit rating could come under pressure if nationalist Karol Nawrocki's presidential election win leads to a prolonged political deadlock that hampers efforts to tackle the large fiscal deficit, ratings agencies said.
Poland faces big spending demands, including a rise in defence outlays after Russia's invasion of Ukraine, and is grappling with the EU's second-highest fiscal deficit.Prime Minister Donald Tusk, who has led a surge in government borrowing since taking power in late 2023, has called a confidence vote in his government for next Wednesday to shore up the centre-left coalition following Nawrocki's triumph.
Fitch Ratings said on Wednesday that the election result was likely to "continue posing challenges for economic reforms and sustained fiscal consolidation and may exacerbate institutional clashes."
It is scheduled to review Poland's rating on September 5.
"Weakened confidence in the government's capacity to deliver fiscal consolidation consistent with stabilising debt at a level closer to peers over the medium term is a negative sensitivity for Poland's 'A-'/Stable sovereign rating," Fitch said.
The credit default swap market has leaned towards a downgrade to Poland's rating since Sunday's election, and had already been pricing in a one-notch downgrade on and off over the last year and a half.
S&P Global said that the political gridlock could curb the government's appetite for fiscal restraint in the run-up to a national election in 2027 and hamper fiscal and judicial reforms, even though the economy had proved resilient to shocks previously.
Both the S&P and Fitch ratings carry a "stable" outlook.
And Moody's told Polish news agency PAP that after Nawrocki's victory, the ruling coalition may increasingly rely on fiscal measures to uphold support, potentially delaying fiscal consolidation.
"We believe that all three agencies could express their Poland-specific concerns through the lowering of their stable outlooks to negative," Raiffeisen economist Stephan Imre said.
"However, we do not believe that this would mark the beginning of a negative downgrade spiral."
(Reporting by Gergely Szakacs and Marc Jones; Editing by Rachna Uppal)
Poland's sovereign credit rating could come under pressure if the political deadlock continues, potentially leading to a downgrade.
Poland faces significant spending demands, including increased defense outlays due to Russia's invasion of Ukraine, and has the EU's second-highest fiscal deficit.
Fitch Ratings and S&P Global have expressed concerns that political gridlock could hinder fiscal reforms and consolidation, while Moody's noted potential reliance on fiscal measures to maintain support.
Fitch Ratings is scheduled to review Poland's credit rating on September 5.
Both S&P and Fitch carry a 'stable' outlook for Poland, but there are concerns that this could change if political challenges persist.
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