Moody's cuts Poland's ratings on deteriorating fiscal strength

Credit ratings agency Moody’s downgraded Poland’s sovereign rating to “A3” from “A2” on Friday, citing sustained deterioration in the country’s fiscal strength.

Poland continues to finance major defence, infrastructure and social spending programmes while maintaining some of the highest fiscal deficits in the European Union.

“Large fiscal deficits have led to a material increase in the government debt burden and, together with rising funding costs, have weakened debt affordability metrics,” Moody’s said.

Finance Minister Andrzej Domanski said while presenting the draft budget in late August that the country expects its general government deficit to remain at 7.1% of GDP in 2027.

Poland’s Fiscal Council said on Monday the government’s draft budget proposal for 2027 did not outline measures to consolidate public finances and the risk of public debt exceeding 55% of GDP was very high.

“We expect the general government deficit to remain elevated at around 7% of GDP in both 2026 and 2027 despite continued strong economic growth,” Moody’s said.

However, the agency raised Poland’s outlook to “stable” from “negative” on expectations that authorities would comply with fiscal rules, allowing for faster fiscal consolidation after the November 2027 election and helping to stabilize the debt burden later in the decade.

“We treat this decision seriously but calmly,” Domanski posted on X, adding that the economy is growing rapidly and its fundamentals remain strong. “We will consistently strengthen public finances, but this requires the cooperation of all state institutions, including the President,” he said.

Poland is experiencing political gridlock between the Brussels-oriented government and the conservative-nationalist president, Karol Nawrocki. In July, Nawrocki referred a bill introducing a windfall tax on oil and gas companies’ profits to the country’s constitutional court.