Moody's downgrades Poland's credit rating to A3 on widening fiscal deficit

On the evening of 18 September 2026, Moody's downgraded Poland's long-term foreign currency issuer rating from A2 to A3, marking the first rating cut for the country in the agency's history. The agency also lowered Poland's short-term rating from Prime-1 to Prime-2, while revising the rating outlook from negative to stable. Moody's stated that the downgrade reflects expectations of lasting deterioration in Poland's fiscal strength, driven by sustained deficits and elevated borrowing expenses. The agency projected that the general government deficit will stay at roughly 7% of GDP in both 2026 and 2027. General government debt is projected to climb from 59.7% of GDP in 2025 to 68.9% of GDP in 2027, with debt expected to stabilize between 70% and 75% of GDP by the late 2020s.

Budgetary pressures and structural limits

Moody's noted that heavy expenditure commitments restrict the scope for fiscal adjustment. Large allocations for national defence, increasing healthcare costs, sustained public investment, and extensive social benefit programmes constrain the government from finding budget savings. The rating agency also pointed to a decline in fiscal policy effectiveness, citing an expansive fiscal stance during favorable economic conditions and limited rebuilding of fiscal buffers. Furthermore, the agency pointed out that an increasing share of debt accumulation occurs outside the scope of the domestic debt rule. Poland retains its constitutional debt ceiling of 60% of GDP and a prudential threshold of 55% of GDP under national definitions, though political factors and the upcoming parliamentary elections in November 2027 remain constraints on fiscal consolidation.

Government response and domestic debate

Following the decision, Minister of Finance and Economy Andrzej Domański noted that Moody's rating now matches the A- assessments of Fitch and S&P. Domański emphasized that Poland's economic growth remains robust and called for institutional alignment across the state.

We take this decision seriously, but calmly. The Polish economy is growing fast, and its foundations remain strong. We will consistently strengthen public finances, but this requires the cooperation of all state institutions, including the President.

Opposition lawmakers and presidential officials criticized the government following the announcement. Marcin Przydacz, the head of the International Policy Bureau in the presidential administration, argued that the decision reflected poor economic leadership.

This does not reflect well on Mr Domański, the Prime Minister, and this entire team. For the poor management of fiscal and economic affairs, all of us as Poles will pay the price. Too many PR tricks and eight stars, and too little real work on the government's part.

Law and Justice lawmaker Andrzej Śliwka also criticized Prime Minister Donald Tusk and Domański for shifting blame onto President Karol Nawrocki despite continuous economic growth.

Consolidation options and public opinion

The downgrade follows public disclosure of the 2027 budget draft, which anticipates a public deficit of 7.1% of GDP in both 2026 and 2027. Piotr Bielski, director of the economic analysis department at Erste Bank Polska, noted that the downgrade was expected in light of these draft figures. Meanwhile, public debate has focused on potential measures to address the state's expanding shortfall. An IBRiS survey conducted for Rzeczpospolita showed that 39.2% of respondents favor reducing social welfare programmes to lower the deficit. Tax increases were supported by 19.7% of respondents, while 16.8% backed cuts to defence spending. Only 7% supported further state borrowing, and 31.8% of participants were undecided or answered that it was hard to say.