Poland’s debt-rating outlook was raised to positive from stable by Fitch Ratings, while the A-minus credit rating was affirmed. The revision reflects narrowing of Poland’s budget deficit and stabilization of public debt, along with the relatively favourable medium-term economic outlook.
Poland’s budget deficit dropped to an estimated 3.4% of GDP in 2012, placing the country among the EU's best performers. The agency expects further, mild consolidation ahead, with deficit falling to 3.2% GDP in 2013 and 2.7% GDP in 2014. Public debt has stabilised and is forecasted to moderate to 54.5% of GDP in 2014, Fitch said. Despite the expected GDP slowdown in 2013 to 1.6%, according to Fitch, medium-term growth prospects are healthy and Polish exporters are well placed to take advantage of the eurozone recovery. Fitch also pointed to the EU budget for 2014-20, which will help Poland bridge remaining infrastructure gaps and improve long-term growth prospects.
According to Fitch, key for future rating upgrade will be: (1) the continued progress with fiscal consolidation - further decline in budget deficit and public debt staying on a clear downward path; and (2) significant reduction in external debt ratios (39% of GDP in 2012 in net terms). Among key risks Fitch names a pronounced loosening of fiscal policy and weak economic performance. After the Fitch statement Polish zloty strengthened against the euro, to 4.1570/EUR from around 4.17/EUR at the opening of the session, while yield on government’s benchmark 10-year bonds fell by around 6bp, to 3.99%.