CEE: Is Poland facing rating downgrade?

Summer is coming to an end and, after inflation data for all countries and flash estimates for 2Q26, we will be releasing the Growth Navigator report to show the directions of economic development after the first half of the year. This week is relatively empty in terms of macroeconomic releases (producer prices are due in Czechia and Slovenia, current account data in Serbia and Slovakia, and unemployment in Slovakia and Croatia). Only Poland stands out, as it will release industrial performance in July alongside producer price growth, and wage and employment data on Thursday. More importantly, however, on Friday after the market closes, Fitch Ratings will review the rating and outlook for Poland. Poland is currently rated at A- with negative outlook, a change that was in response to disappointing fiscal developments. Although we do not expect the rating downgrade at this point, the is non-negligible as fiscal stance remains challenging. The budget draft for 2027 is not published yet, but to avoid downgrade (now or in the future) fiscal consolidation needs to be penciled in. According to Fitch Ratings comments Poland’s current credit could remain unchanged until 2027 or longer if the fiscal deficit trajectory remains within expectations of approximately 7% of GDP in 2026, 6.3–6.5% in 2027, and below 6% in 2028.

FX market developments

Over the last week, we have seen the Polish zloty weakening against the euro, in contrast to other CEE currencies. We believe that local factors may be in play, in particular fears of a rating downgrade by Fitch Ratings. It seems that the market has been pricing in such a possibility, but in case the downgrade scenario materializes, we see a chance of further depreciation of the zloty, at least in the short term. As for central banks, Romania and Serbia kept the policy rate unchanged at 6.5% and 5.75%, respectively. Further, Romania’s central bank governor was quite explicit in saying that rate cuts should be expected only after inflation falls below the key policy rate. Our current year-end inflation forecast is at 5.9%, and we see the turn of 2026 and 2027 as the likely timing for monetary easing discussions to begin in Romania. In Serbia, the central bank expects inflation to be lower than recent projections, which may affect the interest rate outlook.

Bond market developments

Bond markets weakened slightly last week, as elevated oil prices continue to pose a risk to the inflation outlook, potentially implying a higher-for-longer interest rate environment globally. In the CEE region, Polish government bonds underperformed, with yields rising by 15-20bp across the curve on a w/w basis. In addition to global factors, we believe the approaching sovereign rating decision weighed on POLGB performance, while the risk of a downgrade had already begun to be priced into Poland’s eurobonds somewhat earlier. By contrast, Romanian government bond yields declined modestly as inflation fell back into single digits. Together with relatively subdued economic growth, this may support the start of a monetary easing cycle in the first half of 2027.

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