CEE: S&P changed Poland’s outlook to negative

On the radar

• S&P affirmed Poland’s ratings but revised the outlook from stable to negative.
• Trade data will be released in Romania and Slovakia.

Economic developments

S&P affirmed Poland’s long- and short-term foreign-currency ratings at A-/A-2 but revised the outlook from stable to negative, broadly in line with our expectations. At the same time, it downgraded the local-currency ratings from A/A-1 to A-/A-2, bringing them into line with the foreign-currency assessment. Poland’s resilient and diversified economy remains an important rating strength, with S&P expecting real GDP growth to average around 3% in 2027–29. However, robust growth is increasingly being offset by the deterioration in public finances: the general government deficit is projected to remain above 7% of GDP through 2027, while net government debt could rise from 53% of GDP in 2025 to more than 70% by 2029. In the agency’s view, such rapid debt accumulation could constrain the government’s capacity to respond to future shocks and leave Poland more exposed to shifts in investor sentiment. The negative outlook also reflects the limited prospects for meaningful fiscal consolidation ahead of the 2027 parliamentary election, amid political polarization and obstacles to implementing the government’s legislative agenda. A downgrade could follow if persistent fiscal imbalances and rising debt undermine investor confidence, push up financing costs or ultimately require an abrupt fiscal adjustment that weighs heavily on economic growth. An escalation of Russia’s war against Ukraine would represent an additional downside risk by increasing pressure on public finances, weakening growth and heightening security concerns. Conversely, a credible and lasting reduction in the deficit, followed by the stabilization of public debt without significant damage to economic activity, could lead S&P to restore the stable outlook.

Market movements

S&P decision could be mildly negative for Polish assets however we think the market reaction should be moderate, given that the fiscal risks have been to large extent reflected in widening ASW spreads and weakening currency lately. EURPLN holds close to 4.40. EURCZK is at 24.30 and EURHUF is at 363. Further, Poland’s central banker Kotecki said that a preventive 25 bp rate hike in January 2027 remains possible if the fuel-price relief program (CPN) expires and inflation rises well above 4%, citing projected 2027 CPI of 4.2% and oil near USD 90 as risks. He also warned that suspension of Governor Glapinski could hinder the MPC meetings and could unsettle markets. In Serbia, speaker Ana Brnabic called the inaugural sitting of the new parliament for 17 November, in which the Students' List won 140 seats, Vučić's United Serbia 103 and minority lists 7 seats. As for global developments, the oil price has been relatively steady as the US President Donald Trump downplayed the likelihood of new strikes on Iran, though attacks on ships near the Strait of Hormuz kept supply concerns in focus.

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