Poland Must Trim Budget Gap or Risk Rating Cut, Fitch Says

Poland must reduce its budget deficit or face a possible rating cut in the “medium term,” David Riley, head of sovereign ratings at Fitch Ratings, said today.

The government is going to have to enact “quite a strong austerity program” to cut its deficit as the European debt crisis means Poland will probably miss its economic growth targets, London-based Riley said in an interview.

“There is a potential danger to its sovereign credit rating,” Riley said. “We think they will stabilize the debt level and bring down the deficit, but if they fail to do so or significantly miss their targets for next year or the year after, then I think there would be downward pressure on the Polish rating.”

Fitch rates Poland A-, its fourth-lowest investment grade, with a stable outlook.

The government of Polish Prime Minister Donald Tusk, which won yesterday’s general election, pledged to narrow the deficit to 2.9 percent of gross domestic product next year, counting on 4 percent economic growth to boost revenue.

The election result may be positive for Poland’s economy if it delivers policy continuity, Riley said.

“If it’s broadly speaking similar to the outgoing administration then I think that will give us a little bit more confidence, and investors some confidence, that the process of reducing the budget deficit and stabilizing public debt will be undertaken,” he said.

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