S&P Lowers Poland’s Local-Currency Ratings to A-/A-2, Warns Deficit Will Exceed 7%
Key Facts
On November 6, S&P lowered Poland’s long- and short-term local-currency obligation ratings from A/A-1 to A-/A-2 and changed the outlook to negative, according to a statement from Poland’s Finance Ministry. The agency affirmed its foreign-currency ratings at A-/A-2. The decision lowers the assessment of local-currency debt while leaving the external rating unchanged. The move puts the fiscal trajectory and the government’s ability to rein in the deficit at the center of the agency’s concerns. The ministry said fiscal and political expectations were among the factors considered in the ratings assessment.
The agency expects the general government deficit to remain above 7% of GDP through 2027, according to the ministry’s summary. This trajectory comes as Prime Minister Donald Tusk’s government faces difficulty implementing its fiscal-consolidation plans. The ministry said President Karol Nawrocki has veto power, hindering the passage of the government’s legislative and fiscal plans. The agency thus links political polarization with the prospects for progress in reducing the deficit. The persistence of a high deficit adds pressure on debt at a time when S&P sees political constraints on the government’s ability to manage public finances.
On debt, S&P expects general government net debt to exceed 70% of GDP by 2029, up from 53% in 2025, according to the ministry. The gap between those levels points to a substantial expected increase over four years. Reuters also quoted the agency as saying net debt could rise by more than 20 percentage points over five years, among the sharpest fiscal deteriorations globally. The estimate comes against a projected deficit above 7% of GDP in 2025 and 2026, with defense spending ranging from 4% to 5% of GDP, Bankier.pl reported, citing the agency’s report. Rising debt and persistent deficits remain at the heart of the risks behind the negative outlook.
The International Monetary Fund’s projections put Poland’s expected deficit at 7% of GDP in 2025, compared with 6.5% in 2024, the second-largest deficit in Europe, according to the report. The fund said the deficit had risen for four consecutive years before its 2025 projection. It attributed the deterioration to higher defense spending and the launch of new social-benefit programs. It also projected public debt to rise to 59% of GDP in 2025, an increase of nearly 10 percentage points over two years. These estimates provide broader context for the fiscal pressures highlighted by S&P, while using a different debt measure from the net debt in the agency’s projections.
S&P, by contrast, sees the resilience of the Polish economy as a supportive factor and expects real GDP growth to average about 3% annually in 2027–2029, according to the ministry’s statement. The forecast balances a positive growth trajectory against deficit and debt pressures. But the agency’s report, as cited by Bankier.pl, points to the possibility that the government may have to undertake sharp fiscal adjustment in 2029 and 2030 if constitutional debt limits are reached. The agency said this forced adjustment or higher financing costs could add to recessionary pressures. The authorities’ ability to rein in the deficit while protecting growth remains central to the assessment of the fiscal trajectory.
Finance Minister Andrzej Domański said the government would continue taking steps to strengthen the state’s finances despite the president’s vetoes. Money.pl quoted him as saying: "Despite the president’s vetoes, we will continue measures that strengthen the state’s finances." S&P’s criteria say the outlook could return to stable if the government takes lasting and clear steps to reduce the large deficit, leading to a gradual decline in debt without significant damage to growth. Conversely, the agency could lower the ratings if persistent fiscal imbalances and rising debt, alongside political polarization, pose significant threats to growth. The channels cited by the agency include declining investor confidence, higher financing costs or sharp fiscal adjustment.