Moody's lowers Poland's credit rating

International rating agency Moody's lowered Poland's long-term credit rating from A2 to A3 due to deterioration of public finances, high budget deficit and rapid debt growth. At the same time, the rating outlook was changed from negative to stable.

The short-term issuer rating was also lowered - from Prime-1 to Prime-2. The A3 level remains investment grade, however Moody's assessment for Poland is now one notch lower than before.

The main reason for the decision, the agency says, is the persistent weakening of the country's fiscal position. Moody's forecasts that the general government deficit will remain around 7% of GDP both in 2026 and 2027, despite relatively fast growth of the Polish economy.

The deficit reduction, according to the agency, will be hindered by high defense spending, increased healthcare funding, significant public investment and social obligations.

Against this background, Poland's public debt, according to Moody's forecast, will grow from 59.7% of GDP in 2025 to 68.9% in 2027. Together with the debt, budget expenditures on interest payments also increase, which worsens debt service indicators.

At the same time, the agency does not expect a sharp deterioration of the economic situation. Poland's real GDP growth is forecast at 3.7% in 2026 and 3.2% in 2027 after 3.6% last year.

The stable outlook means that Moody's currently considers the risks to the A3 rating balanced. The agency expects that after the 2027 parliamentary elections, the Polish authorities will accelerate fiscal consolidation, and the public debt to GDP ratio will stabilize at approximately 70-75% in the second half of the decade.

Moody's also mentions the security situation related to Russia's war against Ukraine as an additional risk for Poland's credit profile. However, this risk is partially offset by Poland's NATO membership, presence of Alliance and US forces and build-up of own defense capabilities.

A year ago, Moody's kept Poland's rating at A2 but changed the outlook from stable to negative. The current decision actually realized this risk in the form of a rating downgrade.

According to the Polish Ministry of Finance, after Moody's decision, the country's ratings from the three largest agencies are: A3 with stable outlook from Moody's, A- with negative outlook from Fitch, and A- with stable outlook from S&P.

Source: Ministry of Finance of Poland, Moody's