KBRA Assigns A/K1 Ratings to the Republic of Poland

Kroll Bond Rating Agency Europe Limited (KBRA) assigns long-term issuer ratings of A to the Republic of Poland. KBRA also assigns short-term issuer ratings of K1 to the sovereign. The long-term ratings carry a Stable Outlook. The sovereign credit report is available here.

Ratings

 

Rating

Outlook

Action

Foreign Currency Sovereign RatingLong Term

A*

Stable

Assigned

Local Currency Sovereign RatingLong Term

A*

Stable

Assigned

Foreign Currency Sovereign RatingShort Term

K1*

 

Assigned

Local Currency Sovereign RatingShort Term

K1*

 

Assigned

Main credit support factors:

  • Polands European Union (EU) membership, location, size, and attractiveness as an investment destination support its deepening integration within the economic bloc and the countrys economic development. Poland has been a recipient of significant EU Structural and Cohesion Funding that has helped underpin its strong growth performance. EU membership has also been meaningful to Polands strides in developing its institutional capacity, also growth positive.
  • Polands income convergence towards the EU, as reflected in GDP per capita growth, has outpaced all other Central and Eastern Europe (CEE) member states since accession, bolstering support for the EU and showcasing the gains from Polands membership of the economic union.
  • A sound policy environment supports macroeconomic stability. Polands fiscal framework is underpinned by national budget rules, including debt ceilings and contained budget deficits. Its credible monetary policy framework and flexible exchange rate regime allow the economy to weather shocks.

Main credit concerns:

  • Poland has a relatively large external debt burden (109% of current account receipts (CARs) in 2018) and elevated debt service ratio (18.7%). This includes nonresident holdings of zloty-denominated government securities (25% of total) and a large percentage of intercompany-related debt. Concerns are mitigated by Polands sizeable official foreign reserve holdings, access to market funding and modest current account deficits.
  • Concerns over the rule of law and government interference in the judiciary and civil service led the European Commission (EC) to launch infringement proceedings against Poland. While KBRA believes the risk of financial sanctions, the loss of EU voting rights or impact upon future funding is on balance contained if no resolution is found, concerns over the weaker institutional environment do exist.
  • Polands ability to sustain strong economic growth could be constrained by demographic pressures, a possible slowdown in net migration flows, and lower funding from the EUs Multiannual Financial Framework (MFF).

KBRAs sovereign ratings of the Republic of Poland reflect the large size and resilient nature of the Polish economy, the stable macroeconomic environment, a sound monetary and fiscal framework, EU membership, strong financing flexibility and well-performing financial sector. The ratings are constrained by lower income levels compared to other A rated peers, a relatively high external debt burden and the gradual erosion of institutional strength under the PiS government, which could have an impact on future growth and investment prospects.

The ratings are based on KBRAs Sovereigns Rating Methodology published on 11 May 2017. Weights used for assigning these ratings are described in the methodology used for this credit rating action.

Disclosures:

Further disclosures relating to this rating action are available in the EU Information Disclosure Form. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

This is an unsolicited rating. The rated entity or related third party did participate in the rating process and KBRA did have access to the accounts and other relevant internal documents.

Related Publications: (available at www.kbra.com)

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

1 Unsolicited where the rated entity or a related third party did participate in the rating process
2 Unsolicited where the rated entity or a related third party did not participate in the rating process
*With access to the accounts and other relevant internal documents
**Without access to the accounts and other relevant internal documents

 

Analytical Contacts:

Alan Madden, Director (Lead Analyst), Dublin

+353 (1) 588-1230

[email protected]

Joan Feldbaum-Vidra, Managing Director (Rating Committee Chair), New York

+1 (646) 731-2362

[email protected]

Van Hesser, Senior Managing Director, New York

+1 (646) 731-2305

[email protected]