The Fitch ratings agency has revised Poland’s outlook to “negative” from “stable” citing growing risks to public finances.
The agency pointed to Poland’s steadily “deteriorating public finances” as a key factor in its decision on September 5. It forecast this year’s government deficit will hit 6.9 per cent of GDP, up from 6.6 per cent in 2024, 5.3 percent in 2023 and just 1.7 per cent in 2021.
That deterioration has been driven by “significant rises in public wages, pensions, social programmes, and debt servicing costs”, noted Fitch, as well as increase in the defence budget.
Fitch does not find fiscal consolidation plans to be credible and warned that the coming 2027 parliamentary elections are likely to delay any reform of public finances.
“In an environment of high political polarisation the influence of domestic political considerations on policy choices is likely to increase ahead of the next parliamentary elections, due by October 2027,” stated the agency.
“This could reduce the room to implement politically challenging measures before 2028, including those supporting fiscal consolidation.”
Fitch affirmed Poland’s issuer default rating at “A-” on the back of Poland’s diversified economy and European Union membership but signalled that a failure to stabilise debt or improve fiscal discipline could trigger a downgrade.
Reacting to Fitch’s analysis, Polish finance minister Andrzej Domański posted on X that the government was “acting to combine stable finances with investments and necessary security expenditures”. He also pointed to the fact that the annual rate of inflation has fallen to 2.8 per cent and Poland is enjoying economic growth of 3.4 per cent.
“Our government has rebuilt economic growth, unemployment remains low, and inflation is falling the fastest in Europe,” added Domański.
He blamed Poland’s freshly installed and opposition Conservatives (PiS)-allied President Karol Nawrocki for Fitch’s decision, which he called “a consequence of Nawrocki’s blocking of key legislation, which limits the scope for strengthening the economy’s foundations and necessary fiscal consolidation”.
Nawrocki has insisted he will veto any tax rises and has pressed for the maintenance of public infrastructure projects such as the central airport and held a meeting of the Cabinet Council, a consultative body made up of the members of the government and officials from the President’s chancellery, on August 27, which discussed public finance issues.
Leszek Skiba, an economic advisor to Nawrocki, responded saying that the President’s power to veto bills could only have a limited effect on the government budget.
“The agency assessed a deficit of €70 billion euro, growing debt, a declared deficit of 6.5 per cent of GDP rather than the €4 billion, which are the costs of vetoed legislation. How does €4 billion compare with 70 billion?”
Former PiS prime minister Mateusz Morawiecki observed that “decisions on ratings are not made overnight, they are the result of problems in public finances that have been growing for many months”.
According to Morawiecki, the catalyst for Fitch’s decision was the draft budget for 2026 that had been received negatively by the markets, despite the fact that it is planning a lower budget deficit than in 2025.
The present coalition centre-left government led by Prime Minister Donald Tusk was elected on a platform of maintaining and extending welfare benefits and cutting tax, which made it politically difficult to take tough fiscal measures to contain the deficit.
Poland is now covered by the EU’s excessive deficit procedure that obliges it to take measures to contain the deficit. It is, though, pressing to be excused on the grounds of its rise in defence spending in reaction to the war in Ukraine.
The Polish Government has said security is a priority and has allocated a record €5 billion representing 4.8 per cent of its GDP, for defence in its draft budget for 2026.
Fitch in its analysis also said it expects Poland’s GDP to grow by 3.2 per cent in both 2025 and 2026, supported by resilient domestic consumption and stronger absorption of EU funds, which are seen as offsetting the drag from US tariffs on the euro zone.
