Poland 'A-/A-2' Foreign Currency Ratings Affirmed; Outlook Stable

The Russia-Ukraine war and the associated stagflation shock has hit Poland's economy hard. We have lowered our forecast for real GDP growth in 2023 to 1.2% and expect inflation to remain above 10%. Given high defense and social spending pressures, we now estimate the general government fiscal deficit at almost 6% of GDP next year. Despite uncertainty over the evolution of the conflict, we believe Poland's competitive and diversified economy, as well as its strong external and public balance sheets, will help mitigate the risks the war presents. In our baseline scenario, we assume a steady flow of transfers to Poland from the EU seven-year financial framework but delays in Recovery and Resilience Facility (RRF) funds, only a mild full-year

...- The Russia-Ukraine war and the associated stagflation shock has hit Poland's economy hard. - We have lowered our forecast for real GDP growth in 2023 to 1.2% and expect inflation to remain above 10%. Given high defense and social spending pressures, we now estimate the general government fiscal deficit at almost 6% of GDP next year. - Despite uncertainty over the evolution of the conflict, we believe Poland's competitive and diversified economy, as well as its strong external and public balance sheets, will help mitigate the risks the war presents. - In our baseline scenario, we assume a steady flow of transfers to Poland from the EU seven-year financial framework but delays in Recovery and Resilience Facility (RRF) funds, only a mild full-year recession in 2023 in Germany--the country's key trading partner--and no direct involvement of NATO and Poland in the war. - We affirmed our 'A-/A-2' foreign currency and 'A/A-1' local currency ratings on Poland. The outlook is stable....

Ratings Action