HitHawk Research

On 6 November 2026, S&P Global Ratings took the following actions on Poland: And how the report can be politically misleading. Affirmed the long- and short-term foreign-currency sovereign ratings at A-/A-2. Lowered the long- and short-term local-currency sovereign ratings to A-/A-2 (from A/A-1). Revised the outlook on the long-term local- and foreign-currency ratings to negative (from stable). Overview S&P expects Poland’s economy to continue expanding by about 3% over the next two-to-three years, supported by robust domestic demand and exports. However, the fiscal position is projected to remain exceptionally weak: average general government deficits are expected to exceed 6% of GDP, and net general government debt is projected to reach 70% of GDP by the end of the decade. Political polarization is cited as a factor hindering fiscal consolidation. Outlook The negative outlook reflects the risk that elevated budgetary deficits and rising government debt could constrain policy flexibility in the face of future shocks. This could expose Poland to shifts in investor sentiment or necessitate a sharp fiscal adjustment that would weigh on economic growth. Downside scenario: Ratings could be lowered if lasting fiscal imbalances and sustained debt accumulation (complicated by political polarization) result in pronounced risks to GDP growth through weaker investor confidence, higher borrowing costs, or a sharp forced fiscal adjustment. Ratings could also be lowered if the Russia-Ukraine war escalated, placing greater pressure on public finances and growth prospects while heightening security risks. Upside scenario: The outlook could be revised to stable if the government took steps to sustainably and markedly curb large budgetary deficits, spurring a gradual reduction in government debt, while avoiding severe consequences for economic growth. Rationale The outlook revision reflects heightened risks that rapidly increasing debt could reduce the government’s ability to respond to shocks and weigh on economic growth. Net debt is projected to surpass 70% of GDP by 2029 (an increase of more than 20 percentage points over five years), described as one of the most significant fiscal deteriorations globally. Fiscal deficits averaged over 7% of GDP in 2025 and 2026, driven by high defense spending (4–5% of GDP), rising social expenditure, and a substantial public-sector wage bill. Meaningful consolidation is viewed as unlikely ahead of the 2027 parliamentary elections (projected deficits of 7.1% of GDP in 2027 and 6.2% in 2028). S&P notes the government might face sharp fiscal consolidation by 2029–2030 due to constitutional debt limits (or earlier if funding costs rise), with both scenarios described as likely to be recessionary. Policymaking is described as difficult. The government led by Prime Minister Donald Tusk faces constraints from the veto powers of President Karol Nawrocki (aligned with the opposition PiS party) and the lack of a three-fifths majority to override vetoes. Political divisions also include Poland’s relationship with the EU. Despite polarization, there is noted broad cross-party consensus on core security and foreign-policy objectives (including support for Ukraine and a strong NATO presence). S&P’s report can create the impression that Poland’s huge deficits are mainly the result of constitutional gridlock (presidential vetoes blocking the Tusk government from cutting spending). In reality the deficit has more than doubled under Tusk: • 2022: 3.4% of GDP • 2023: 5.2% • 2024: 6.4% • 2025: 7.2% Most of the rise happened after he took office. The report focuses on why it’s hard to reverse, not on who drove it higher. A key supporting factor for the ratings is the resilient economy, with real GDP growth projected to average approximately 3% from 2027–2029. Growth of 3.6% is expected in 2026, supported by the peak of EU-funded investment, recovering exports, and robust consumption. Strengths cited include a diversified economy, flexible labor and product markets, an educated workforce, and access to nondebt-creating external funding. Investment growth is expected to moderate after the EU Recovery and Resilience Facility winds down, though growth is still projected to remain solid relative to peers. The local-currency rating was lowered to equal the foreign-currency rating because of reduced institutional and fiscal flexibility. Large fiscal imbalances and institutional challenges to policymaking mean the government’s willingness and ability to service local-currency debt is now assessed as equal to foreign-currency debt. Fiscal projections are weaker than previously envisaged, with a track record of recent fiscal slippages. Additional points from the report include: High defense spending and past expansions in social spending continue to contribute to fiscal strain. EU funds (including the Recovery and Resilience Facility and the Security Action for Europe program) are important near-term growth drivers. Hybrid threats linked to Russia are noted as ongoing risks to NATO countries (including Poland), with the main impact so far on public finances rather than direct economic activity. External accounts are projected to remain manageable (modest current-account deficits and low net external leverage). spglobal.com/ratings/en/regu…

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