Fitch Flags Poland's Rising Debt & Deficit Risk

Fitch Ratings has issued a stark forecast for Poland, projecting that the country's fiscal deficit will remain persistently high and its government debt is on a trajectory that fails to stabilize in the medium term.

Milan Trajkovic, Fitch's lead analyst for Poland, outlined the agency's concerns on Wednesday, painting a challenging picture of the nation's public finances.

Deficit to Linger Near 7% Through 2026

According to Fitch's analysis, Poland’s fiscal deficit is expected to hover around 7% of GDP not only last year but also through 2026.

A gradual improvement is not anticipated until later in the decade. The ratings agency projects the deficit will only modestly decrease to approximately 6.3% to 6.5% in 2027 before dipping just below the 6% mark in 2028.

Government Debt Nears a Critical Threshold

The more pressing concern highlighted by Fitch is Poland's rapidly growing government debt, which is forecast to hit 70% of GDP by 2027. Trajkovic emphasized a critical shift in the agency's outlook, stating, "for the first time, we do not see Polish general government debt stabilising in the medium term."

This inability to stabilize the debt level poses a direct threat to the country's credit rating.

What Could Trigger a Rating Downgrade?

The analyst warned that a rating downgrade could be triggered by several factors, including:

• A failure to implement additional fiscal consolidation measures.

• Weaker-than-expected economic growth.

• A sharp increase in the costs of servicing government debt.

Limited Room for Interest Rate Cuts

On the monetary policy front, Fitch sees little capacity for the central bank to ease conditions. The agency's forecast includes only minimal adjustments, predicting a single 25 basis point interest rate cut in 2026 and another identical reduction in 2027. This suggests that tight monetary policy will likely remain in place to manage economic pressures.