S&P revised Poland’s long-term foreign currency debt rating perspective from positive down to stable yesterday. The agency explained that the decision reflected the ongoing political uncertainty which might pose a threat to fiscal stability, and the deteriorating perspective for the EMU entry. One might argue whether the revision itself was appropriate or not (and probably the answer would have been ‘yes’) although its timing seems at least awkward. First of all, the political outlook has not changed in a way that would substantiate such a move just now. Moreover the economy has successfully decoupled from politics and is pushing forward at an ever stronger pace. It’s true that the ruling PiS and the parliamentary fringe groups have not yet sealed a coalition deal, but eventually they should reach some sort of an agreement. It seems that it would make more sense to evaluate the deal and the political outlook then.
On the other hand, S&P has been saying quite clearly that despite the positive perspective it would not upgrade Poland’s rating until more orthodox fiscal measures were put into action - and none have been implemented to date. All in all, the revision itself was not nearly as much of a surprise as the timing, hence the market’s fairly conservative reaction to the news - at first the zloty weakened by 0.5% to the euro, but eventually managed to claw back a large portion of the loss.