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Fitch rating agency/ Fitch Ratings affirms previous Poland’s credit rating

25.09.2020

  • On September 25, 2020 Fitch rating agency announced its decision about keeping Poland’s credit rating unchanged at the level of A-/F2 for long and short-term liabilities, respectively, in foreign currency and A-/F1 for long and short-term liabilities, respectively, in local currency.
  • Rating’s outlook remained at a stable level.

Fitch rating agency in its press release justifying its decision indicates diversified economy with a track record of stable growth, sound policy framework, coupled with EU membership.

Agency points that the coronavirus pandemic and related restrictions negatively impacted the Polish GDP growth which shrank by 8.9% qoq in 2Q 2020, driven by a collapse in private consumption and fixed investment. However it was still the smallest contraction amongst the Visegrad-4 countries due to the lower Poland’s reliance on external demand and significant fiscal stimulus.

Fitch expects that GDP growth to decline by 3.5% in 2020 before recovering to 4.5% in 2021 and 3.3% in 2022. This would be supported by investment growth and private consumption. Fitch forecasts fiscal deficit at 8.2% of GDP in 2020, 5.4% of GDP in 2021 and 4% of GDP in 2022, below official government targets (12% of GDP in 2020 and 6% in 2021). Fitch’s forecasts reflect more optimistic estimation on growth compared to the authorities, as well as potential for EU support under the Next Generation Rescue package not included in the official budgets. Fitch expects general government debt to GDP ratio to increase to 59.2% by end-2020 and stabilise at an average of 59.3% over 2021-2022.

Rating prospects

According to the agency, Poland’s rating could be raised as a result of fiscal consolidation over the medium-term that leads to a sustained decline in government debt/GDP, sustained improvement in external finances, including net external debt burden in nominal terms. Additionally, rating could be higher as a result of GDP growth supporting faster income convergence towards countries with ‘A’ category. On the other hand, rating could be lowered in case of sustained increase in government debt, e.g. from a failure to consolidate public finances, crystallisation of significant contingent liabilities or sustained weakening of economic growth over the medium-term, but also due to deterioration in governance standards or the business climate leading to an adverse impact on the economy.

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