Poland’s Rating Affirmed by S&P on Fiscal Consolidation Progress
Poland’s credit rating was affirmed at the fourth lowest investment grade by Standard & Poor’s, which cited the government’s commitment to fiscal consolidation.
S&P held the foreign-currency debt grade of the European Union’s largest eastern member at A- with a stable outlook, the company said today in an e-mailed statement from New York. That leaves it at the same level as Slovenia and Malaysia.
“The ratings on Poland are supported by our view of its diversified, resilient economy made more flexible by a floating exchange rate, which has enabled adjustment to external shocks,” S&P said in the statement. “In affirming the ratings on Poland, we view the government as committed to fiscal consolidation, despite worsening near-term deficit expectations and amendments to fiscal rules.”
Prime Minister Donald Tusk’s government is struggling to revive the economy, which is set to grow at the slowest pace since the 1990s this year. The government announced plans to widen the budget deficit by 16 billion zloty ($5 billion) and suspend rules limiting fiscal stimulus to give it scope to kick-start a recovery. The cabinet is also working to overhaul the country’s privately managed pension funds to reduce public debt.
S&P predicted that the government will amend the budget following a review and will choose how to overhaul its pension system by the end of the month or early next month.
“Although the proposed changes to the management of public finances are designed to address structural weaknesses, we also view them as indicating Poland’s increasingly constricted fiscal position,” S&P said. An eventual recovery “will reduce the likelihood that near-term fiscal slippage will recur.”
S&P forecasts 1 percent growth in real gross domestic product per capita in 2013, accelerating to an average of 2.7 percent by between 2014 and 2016.
It also predicts that the budget deficit will widen to 4.3 percent of GDP this year from 3.9 percent in 2012, before narrowing to 3 percent by 2015.
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