Poland's Fiscal Outlook: Political Tensions and Economic Challenges
Fitch Ratings has revised Poland's outlook to 'negative' due to rising risks to public finances, citing political hurdles and fiscal deficits as major concerns. With upcoming reforms delayed, government debt is projected to rise. Poland's fiscal discipline and EU funding will be crucial for economic stability.
Fitch Ratings has shifted Poland's economic outlook to 'negative', pointing to escalating risks in public finances. The adjustment arises from wider-than-anticipated deficits and the absence of credible fiscal consolidation plans, compounded by political obstacles that may stall reform efforts before the 2027 elections.
Political disagreements, as evidenced by President Karol Nawrocki's veto and tax-related opposition, suggest a coalition hampered in enacting stringent fiscal policies. Fitch emphasizes that maintaining EU funds is essential for sustaining GDP growth while noting Poland's extended defense spending against perceived threats from Russia.
Finance Minister Andrzej Domanski responded by asserting that Poland's government aims to balance stable finances with investments. Yet, the onus on Poland to stabilize its debt remains, with FY2026 defense spending set at a record 4.8% of GDP. Despite Fitch projecting a robust GDP growth rate, potential downgrades loom if fiscal discipline falters.
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