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Third credit rating outlook cut looms for Poland
Published by Global Banking & Finance Review®
Posted on November 6, 2025
4 min readLast updated: January 21, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on November 6, 2025
4 min readLast updated: January 21, 2026
Poland's credit rating outlook may be downgraded by S&P due to fiscal challenges and political risks. Analysts expect negative outlooks to continue.
By Karol Badohal
WARSAW (Reuters) -Poland could see a third major credit agency, S&P, lower its outlook on Polish debt to 'negative' on Friday, in what economists say is a sign of mounting concern that Warsaw's centrist government has no plan to fix its faltering finances.
Poland's credit ratings have risen steadily - with only one brief downtick in 2016 - since 1995, when agencies began appraising the creditworthiness of the ex-communist country, now the EU's largest economy outside the euro zone.
But last month, Fitch Ratings and Moody's put Poland on notice that they could deliver cuts unless Warsaw implements a credible plan to halt growing debt, which is being driven by its NATO-leading boost in defence spending, by costly social programmes and a concomitant increase in debt servicing costs.
Now many analysts expect S&P to also cut Poland's outlook on Friday.
"Considering what the other two agencies have done, I think the chances of (an outlook cut) are very high," mBank economist Arkadiusz Balcerowski told Reuters.
Balcerowski added he did not foresee a rating downgrade for Poland in the coming quarters, but expected all agencies to maintain negative outlooks.
POLITICAL RISKS TO FISCAL CONSOLIDATION
All three agencies have said political risks to consolidation stem from a standoff between Prime Minister Donald Tusk's pro-EU coalition government and the new opposition-allied conservative president, Karol Nawrocki. Both sides are unwilling to back tough measures ahead of a 2027 parliamentary election.
A draft budget for 2026 has the general government deficit easing slightly to 6.5% from an expected 6.9% this year. Still, it includes tax hikes, such as higher corporate income tax for banks, yet to be signed by Nawrocki, who has stated his opposition to new fiscal burdens on 'ordinary Poles'.
"We're seeing some risk that some of the revenue-enhancing measures in the budget could potentially not be implemented due to a veto from the president," Moody's senior analyst Heiko Peters told Reuters.
"And we see continued pressures on the expenditure side, related also to the ageing of the population and to defence spending."
STRAINS FROM WAR, PANDEMIC
Poland's previous Law and Justice (PiS) government brought the deficit close to zero in 2018 and 2019 while introducing generous social programmes by plugging tax collection gaps.
Economic output - and revenues - doubled nominally during its eight-year rule, bringing debt down slightly to 49.5% of GDP in 2023 from 51.1% in 2015.
However, strains appeared when relief measures to help cushion the impact of the 2020 coronavirus pandemic and energy crisis after Russia's invasion of Ukraine in 2022 put unexpected pressure on public finances. The invasion prompted a surge in Poland's defence spending and outlays aimed at aiding Ukraine.
The deficit surpassed an EU-mandated threshold of 3% from 2022, jumping to 5.3% in 2023.
Tusk's government, which took power in late 2023, loosened fiscal policy further by adding some campaign pledges to the 2024 draft budget it inherited from the outgoing government. The deficit rose to 6.5% in 2024, pushing debt up to 55.3% of GDP.
Poland's revenues have failed to keep pace with growing expenditure since 2020.
GROWING OUT OF DEBT
Finance Minister Andrzej Domanski says the government aims to grow out of debt by increasing GDP, as well as through debt-cutting measures. Poland expects its economy to expand by 3.5% next year and around 3% annually through 2029.
Warsaw's recent move to forfeit 21.5 billion zlotys ($5.91 billion) in cheap EU loans did little to allay concerns over a long-term rise in borrowing, S&P Global told Reuters.
However, some economists have said that decision could be enough to prevent a local metric of debt from hitting a constitutional precautionary threshold in 2026, which would trigger mandatory austerity measures in the 2027 election year.
(Reporting by Karol BadohalEditing by Gareth Jones)
A credit rating is an assessment of the creditworthiness of a borrower, indicating the likelihood of default on debt obligations. It helps lenders evaluate risk before extending credit.
Economic growth is the increase in the production of goods and services in an economy over a period of time, typically measured by the rise in Gross Domestic Product (GDP).
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