Credit rating agency S&P has revised Poland's credit outlook to negative and downgraded its local-currency debt ratings, saying the country has experienced 'one of the most significant fiscal deteriorations globally' and that 'political polarisation hinders fiscal consolidation'. The move follows similar actions by Fitch and Moody's, with Moody's cutting Poland's rating in September to its lowest since 2002.
Poland's budget deficits have ballooned in recent years, driven by a rapidly expanding defence budget following Russia's 2022 invasion of Ukraine and by increases in social spending. Last year's deficit stood at 7.3% of GDP, the second-highest in the European Union, and is forecast to dip only slightly this year to 6.7%, according to finance ministry projections. Next year's budget envisages a deficit of 7.1%. The figures are far higher than the targets Poland pledged to reach when it was placed under the EU's excessive deficit procedure in 2024.
S&P said in its statement that its negative outlook reflects the risk that elevated deficits and rising government debt could constrain policy flexibility in the face of future shocks, potentially exposing Poland to shifts in investor sentiment or necessitating a sharp fiscal adjustment that would weigh on economic growth. It projects net debt exceeding 70% of GDP by 2029, a rise of more than 20 percentage points in five years that it described as 'one of the most significant fiscal deteriorations globally'.
The agency noted that parliamentary elections due in 2027 make 'meaningful consolidation unlikely' before then, and that President Karol Nawrocki's veto power means the government 'faces constraints in advancing its legislative and fiscal consolidation agenda'. It also warned that renewed institutional tensions around Poland's constitutional court could weigh on policy predictability. However, S&P noted that Poland's economy remains resilient, with real GDP growth projected to average about 3% between 2027 and 2029, a peak in EU-funded investment this year, and exports that have picked up.
Alongside the outlook shift, S&P lowered Poland's local-currency ratings from A/A-1 to A-/A-2, aligning them with the country's foreign-currency ratings. The agency said its fiscal projections were now weaker than previously envisaged, citing a track record of recent fiscal slippage.
Finance Minister Andrzej Domański acknowledged S&P's decision to lower Poland's outlook to negative in a social media post and pointed to the report's statement that presidential vetoes constrain the government's legislative and fiscal consolidation agenda. He said the government would continue taking steps to strengthen the country's finances despite the presidential vetoes.
President Karol Nawrocki, who has vetoed a record number of bills since taking office last year, has noted that the expanding deficits began before his presidency. He blamed the government of Prime Minister Donald Tusk for overseeing budgetary 'chaos' and causing 'a deep crisis of credibility'.
Marcin Ociepa, deputy head of the parliamentary caucus of the opposition Law and Justice party (PiS), accused the government of 'trying to shift responsibility for Poland's credit rating downgrade onto the president'. He said any family that managed its finances the way Tusk manages the country's finances would drown in debt and go bankrupt, adding that the same fate awaits Poland if the current government remains in power.
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Poland's budget deficit as a share of GDP
% of GDP
Source: Finance ministry of Poland projections, as reported by Notes from Poland
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Analysis
Why This Matters
The downgrade could increase Poland's borrowing costs and affect investor confidence, with implications for the broader Central European region.
It underscores the tension between fiscal consolidation and political polarisation, a challenge likely to persist ahead of 2027 elections.
The decision follows similar moves by the other big rating agencies, signaling a sustained loss of confidence in Poland's fiscal trajectory.
Background
Poland has been running large budget deficits driven by a sharp increase in defence spending after Russia's 2022 invasion of Ukraine and long-term social programmes such as the 500+ child benefit. The country was placed under the EU's excessive deficit procedure in 2024, pledging to bring the deficit down to 3.7% of GDP by 2027. Moody's cut Poland's rating to A3 in September 2026, its lowest since 2002, and Fitch has had a negative outlook since 2025. S&P's downgrade is the first by one of the big three agencies since 2016.
Key Perspectives
Andrzej Domański (Finance Minister): Acknowledged the downgrade but argued that the report shows presidential vetoes constrain the government's fiscal consolidation efforts.
Karol Nawrocki (President): Blamed the government for budgetary 'chaos' and a 'deep crisis of credibility', noting that deficits grew before his term.
Marcin Ociepa (PiS deputy caucus head): Accused the government of deflecting blame onto the president and criticised its management of public finances.
What to Watch
The impact of the downgrade on Poland's bond yields and investor sentiment in the coming months.
Whether the government can present a credible fiscal consolidation plan before the 2027 parliamentary elections.
The outcome of the 2027 elections and its effect on the country's fiscal direction and credit ratings.
12 claims in this story checked against 1 source: 12 supported.
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SupportedS&P revised Poland’s credit outlook to negative.Notes from Poland: “Credit rating agency S&P has revised Poland’s outlook to negative”
SupportedS&P described Poland’s fiscal deterioration as “one of the most significant fiscal deteriorations globally”.Notes from Poland: “the country has seen “one of the most significant fiscal deteriorations globally””
SupportedS&P said “political polarisation hinders fiscal consolidation”.Notes from Poland: ““political polarisation hinders fiscal consolidation””
SupportedS&P lowered Poland’s local-currency ratings from A/A-1 to A-/A-2, matching its foreign-currency ratings.Notes from Poland: “from A/A-1 to A-/A-2, the same level as its foreign currency ratings.”
SupportedS&P projects Poland’s net debt will exceed 70% of GDP by 2029.Notes from Poland: “S&P says that it projects Poland’s net debt exceeding 70% of GDP by 2029.”
SupportedThe projected net-debt increase is more than 20 percentage points over five years.Notes from Poland: “That rise of “more than 20 percentage points over five years marks one of the most significant fiscal deteriorations globally”.”
SupportedPoland’s deficit was 7.3% of GDP last year, is forecast at 6.7% this year and is budgeted at 7.1% next year.Notes from Poland: “Last year’s deficit, at 7.3% of GDP, was the second-highest in the European Union . This year it is forecast to drop slightly, to 6.7%, according to recent finance ministry projections. But next year’s budget foresees a deficit of 7.1%.”
SupportedMoody’s cut Poland’s rating in September to its lowest level since 2002.Notes from Poland: “Moody’s cut the country’s credit rating in September this year to its lowest level since 2002.”
SupportedS&P said meaningful fiscal consolidation was unlikely before the 2027 parliamentary elections.Notes from Poland: “The agency notes that Poland will hold parliamentary elections in 2027, making any “meaningful consolidation unlikely” before then.”
SupportedNawrocki had vetoed a record number of bills since becoming president last year.Notes from Poland: “Nawrocki has vetoed a record number of bills since becoming president last year”
SupportedDomański acknowledged S&P’s negative-outlook decision in a social media post and said the government would keep taking steps to strengthen the country’s finances despite presidential vetoes.Notes from Poland: “Finance minister Andrzej Domański acknowledged S&P’s decision to lower Poland’s outlook to negative in a social media post. ... “Despite the presidential vetoes, we will continue taking steps to strengthen the country’s finances,” wrote Domański.”
SupportedOciepa accused the government of trying to shift responsibility for the downgrade onto the president and said a family managing its finances like Tusk would go bankrupt.Notes from Poland: “accused the government of “trying to shift responsibility for Poland’s credit rating downgrade [sic] onto the president”. “Any family that managed its finances the way Donald Tusk manages our country’s finances would drown in debt and go bankrupt,” wrote Ociepa.”