Fitch affirms Poland at A- with negative outlook citing deficits and political friction

Rating affirmation and economic backdrop

On Friday evening, Fitch Ratings affirmed Poland's long-term foreign and domestic currency debt ratings at A- and short-term ratings at F1, maintaining a negative outlook. The agency attributed the A- rating to a diversified and resilient economy, European Union membership benefits, a credible monetary and exchange-rate policy framework, and solid external finances relative to peer nations. Fitch projects Poland's gross domestic product to expand by 2.9% in 2027. However, the agency balanced these fundamental macroeconomic strengths against high fiscal deficits, quickly rising public debt, and lower governance indicators compared to other countries in the A rating category.

Fiscal deficit forecasts and debt trajectory

Poland recorded a general government deficit of 7.3% of gross domestic product in 2025, which was the highest in 15 years, while public debt reached 59.7% of GDP. Fitch forecasts the general government deficit to remain at 6.9% of GDP in 2026, more than double the 3% median for peer countries. The rating agency revised its 2027 deficit projection upward to 6.7% of GDP from the 6.2% estimated during its February review, with deficits expected to stay elevated at 6.1% in 2028. Fitch also projects gross general government debt to reach 72.7% of GDP by 2028. Poland remains subject to the European Union excessive deficit procedure launched in 2024, while national fiscal rules such as the statutory debt brake are unlikely to provide a binding constraint before 2029.

Political friction and fiscal policy constraints

Fitch stated that the negative outlook reflects the absence of a credible fiscal consolidation plan, domestic political challenges, and risks of pre-election loosening before the 2027 vote. The agency observed that uncoordinated and confrontational relations between the government and the president, including presidential vetoes, limit Poland's capacity to implement economic reforms and fiscal measures. Persistent pressures from healthcare costs, defense outlays, and public debt servicing costs also impede deficit reduction. While Fitch President Ian Linnell acknowledged defense spending pressures, he noted that social transfers and public sector wages are also central drivers of Poland's budget shortfall. Finance Minister Andrzej Domański commented on the outcome on social platform X.

This is very good news. In the agency's opinion, the Polish economy remains strong, resilient, and well-diversified.

Rating conditions and sovereign review calendar

Fitch indicated that a revision of the rating outlook to stable would require a slower accumulation of public debt relative to GDP, achieved through deficit contraction or sustained economic growth. A rating downgrade could follow if the authorities fail to reduce deficits due to lack of consolidation or pre-election spending, or if medium-term growth slows due to declining competitiveness. The Polish government proposed tax modifications introducing a new personal income tax rate, higher tax brackets, and higher corporate taxes on large companies, though the Finance Ministry expects this package to remain budget-neutral. Fitch previously lowered Poland's outlook from stable to negative in September 2025. Among other credit rating agencies, Moody's rates Poland at A2 with a negative outlook ahead of its 18 September review, while S&P Global Ratings maintains an A- rating with a stable outlook prior to its 6 November review.