Another Ratings Agency Shows Poland a Yellow Card as Public Finance Indicators Worsen

S&P’s decision to downgrade the outlook on Poland’s rating is a yellow card for politicians of all stripes, shown to them at the very start of the election campaign, Rafał Benecki, chief economist at ING Bank Śląski, told PAP.

On Friday, ratings agency S&P Global kept Poland’s long-term foreign-currency rating at “A-” but lowered its local-currency rating from “A” to “A-“. It also cut the outlooks on both ratings from stable to negative.

– We anticipated this decision. The trends of recent years called for a reaction, and S&P has lately been the most patient agency. But there has been a further deterioration in indicators for Poland’s public finances and an intensification of political conflict, so all of this no longer fits within what is acceptable for a rating at this level, the ING Bank Śląski chief economist said.

In his view, the agency’s justification clearly stresses several factors that contributed to the decision. First of all, it is the worsening of the general government deficit.

– Compared with what the agency had at the time of its May review, we have a worse deficit result for 2025 and 2026, as well as for 2027, for which a deficit has been planned. This fits a trend, visible for several years, of exceeding previously set deficit levels, Benecki said.

He added that the agency also pointed to the growing political conflict in Poland, which gives no hope for a quick fiscal adjustment. – This concerns vetoes of tax laws meant to increase budget revenue, but also resistance to restoring “checks and balances” institutions, he said.

The economist stressed that S&P was right to lower Poland’s rating in 2016, precisely because of the weakening of rule-of-law institutions and of the system of “checks and balances,” that is, “restraining politicians’ impulses through independent state institutions.”

– The agency was deeply criticized at the time and even reversed its decision. Years later it turns out they had good intuition. And that was when the trend in Poland’s ratings changed. After decades of upgrades and years of staying in the A category, the trend shifted to a weaker one, the economist said.

In his opinion, S&P’s current November assessment of the situation is harsher than the one the agency made in May of this year.

– Until recently, the agency maintained its stable assessment of Poland because a strong economy balanced out weaker public finances, but that is no longer enough. High deficits and rising debt required a change in the rating outlook. In May, the agency stressed that Poland is the fastest-growing country among those whose ratings it monitors. Now we read that Poland is the country whose debt is growing the fastest, he said.

Rafał Benecki added that the conditions set out in the justification for restoring a stable outlook are also harsher than before, because they indicate that a lasting and significant reduction of the deficit would be necessary. – This shows that S&P’s patience has run out, he noted.

The economist also pointed out that S&P has put the credit rating of debt in the local currency on par with that of debt in foreign currencies.

– This is a symbolic gesture. Normally the local-currency rating is higher, because it is easier to finance debt in the domestic currency than in a foreign one. But the negative trends of recent years mean that the natural flexibility provided by having one’s own currency or a deep domestic financial market, which makes it easier to finance enormous borrowing needs, is no longer enough to sustain a higher local-currency rating, Benecki said.

He stressed that S&P’s decision is a signal to politicians and to the public.

– It is a yellow card for politicians, shown to them at the very start of the election campaign. It is a signal that genuine fiscal adjustment is necessary and that this element must be brought into the public debate in a credible form. The agency’s decision lets voters understand that many politicians do not feel the seriousness of the situation. The current start of the campaign looks only slightly different from before; there is less throwing around of huge sums, but many parties still talk either about tax cuts or about spending increases without indicating credible sources to cover that spending, said the chief economist of ING BSK.

He concluded, however, that S&P’s decision will not have a major impact on market conditions.

– Investors have long been pricing Polish debt as if our country had a lower rating. A change in the rating outlook will therefore not be reflected in the valuations of Polish assets, Rafał Benecki concluded. (PAP)

Expert: S&P’s Decision to Cut Rating Outlook Is a Strong Warning Signal

S&P Global’s decision to lower the rating outlook is another strong warning signal pointing to the need to stabilize unbalanced public finances, Kamil Pastor, an economist at PKO BP bank, told PAP.

On Friday, ratings agency S&P Global kept Poland’s long-term foreign-currency rating at “A-” but lowered its local-currency rating from “A” to “A-“. It also cut the outlooks on both ratings from stable to negative.

– The main reason for the deterioration in Poland’s credit assessment is the fiscal situation. In S&P’s view, rapidly rising debt may limit the government’s ability to respond to shocks and negatively affect economic growth, the PKO BP economist noted.

He added that “the agency points to growing fiscal imbalances, worsening forecasts and a history of missing budget targets in a difficult political environment.”

– S&P’s fiscal forecasts do not differ significantly from ours, although they are worse than the agency’s earlier projections. This may suggest that S&P is gradually “losing patience” with the state of Poland’s public finances, Kamil Pastor said.

He pointed out that, according to S&P, the positive factors supporting the rating remain high economic growth and a highly liquid, deep domestic-currency capital market, which provides considerable capacity to finance the government’s borrowing needs.

– However, S&P sees a risk that the need for a sharp, forced fiscal consolidation in 2029–2030 could significantly weaken GDP growth. It also points to the dependence of the Polish economy on European economic conditions and on geopolitical tensions, the PKO BP economist said.

He also noted that the difficult political situation is an important element of S&P’s assessment. – The agency indicates that presidential vetoes may hinder the implementation of the government’s reforms, and that tensions over the judiciary and persistent political polarization will limit the ability to shape economic policy, including fiscal consolidation, he added.

Kamil Pastor said S&P could lower Poland’s rating again if persistent fiscal imbalances and rising debt, further complicated by political polarization, led to serious threats to economic growth, for example through weaker investor confidence, higher financing costs or the need for a sharp, forced fiscal adjustment.

The expert added that an escalation of Russia’s war against Ukraine would also be a negative factor.

Pastor stressed that a return to a stable outlook would require action toward a lasting and significant reduction of the fiscal deficit, leading to a gradual decline in debt without significantly weakening economic growth.

– In our assessment, S&P’s decision does not stem from the emergence of new threats but is a reaction to the chronic nature of the fiscal challenges. This was not changed by the positive news of recent weeks, including the decline in the general government deficit in the first half of 2026, Finance Minister Andrzej Domański’s more favorable fiscal forecast for 2026, or the draft changes to personal income tax (PIT) and corporate income tax (CIT) that are favorable for budget revenue, the economist said.

He assessed that Friday’s decision is a result of the fact that, for S&P, the credibility of prospects for a lasting reduction of the deficit is also becoming increasingly important.

– We treat the agency’s decision as another strong warning signal pointing to the need to stabilize unbalanced public finances. Strong economic growth and the potential to increase the scale of financing of borrowing needs give Poland room for gradual fiscal adjustment. However, a lack of action in this direction increases the risk that in the future the consolidation will have to be much sharper and more costly for economic growth, Kamil Pastor said. (PAP)