Moody's does not change Poland's rating – it was reported in a statement. As a result, our country's credit rating is at “A2”, and the outlook – stable.
The stable rating outlook reflects the agency's assessment that Poland's vulnerability to geopolitical events, particularly in terms of security, is limited by Poland's membership in NATO. This assessment is also supported by the “significant improvement” in relations with the EU following the change of government in December 2023.
Poland's Rating According to Moody's
“At the same time, given the antagonistic relations between President Duda and Prime Minister Tusk's government, we expect only limited progress on reforms to fully restore the independence of the judiciary, at least until the presidential elections in mid-2025. The stable outlook also reflects our assessment that the impact of the projected increase in the government debt burden and weakening debt affordability offset Poland's solid growth prospects,” the agency said.
Moody's believes Poland's rating would come under pressure to improve in a scenario of better-than-expected relations between the president and the coalition government, which would allow for the rapid restoration of full independence of the judiciary and support the implementation of other policy initiatives.
Signs that Poland’s currently expected weakening in debt ratios will prove lower and that stronger fiscal consolidation efforts will drive government debt levels well below 60% of GDP, ultimately restoring its pre-pandemic strong public sector balance sheet, would also be positive for the credit rating. Further progress in increasing the sophistication and complexity of the Polish economy could also support an upgrade.
Pressure to downgrade the rating would appear in a scenario of a much faster increase in debt burden. public debt with no signs of reversal and with debt affordability indicators worsening beyond the agency's current baseline.
“A further deterioration in the rule of law that would have a negative impact on the location of business in Poland would also be negative for the credit rating,” it added.
Moody's baseline scenario does not assume a military confrontation involving NATO, but any military attack on Poland would result in an immediate negative rating action.
In such a scenario, which we perceive as a shock with a very low risk of materializing but with a potentially very high impact, Poland's rating would come under significant additional pressure, which would likely lead to a rating downgrade by several notches.
Polish economy. Moody's forecasts
The agency predicts an increase in dynamics Poland's GDP in 2025 by 3.5 percent vs. 3.0 percent in 2024
The general government deficit is forecast by Moody's to exceed 5 percent of GDP at least until the end of 2025, with the sector's debt to GDP ratio rising to 57 percent in 2025.
Moody's expects gradual fiscal consolidation from 2026, with debt stabilising at just above 60% of GDP.
Of the three largest rating agencies, Poland's creditworthiness is rated the highest by Moody's – at “A2”. Poland's rating according to Fitch and S&P is “A-“, one level lower than Moody's. The outlook for all ratings is stable.
The last round of Poland's rating reviews this year is scheduled for November 8 (Fitch and S&P Global Ratings).
What is a rating?
Rating agencies are private institutions. They were created to help investors assess the scale of risk of their investment activities. Their services are used by individuals, international corporations, banks, pension funds and capital funds. Financial institutions, companies or countries can be under the agency's microscope. The assessment of a country has a real impact on its economic attractiveness.
The American agencies Standard & Poor's, Fitch and Moody's are the so-called “big three” and control over 90 percent of the global market for rating services. Each agency uses its own system.
The rating is expressed by a letter symbol according to the adopted scale, supplemented by modifiers – numbers or signs – to define differences within a single category.
Main image source: Leszek Szymanski/PAP