WARSAW May 12 Ratings agency Moody's Investors
Service revised the outlook on Poland's A2 issuer rating on
Friday to stable from negative, citing reduced risks of loose
fiscal policy and a lack of material deterioration in the
investment climate under the country's right-wing government.
The move reversed Moody's decision to revise the outlook
lower in May 2016 and came after peer ratings agency S&P in
December revised the outlook on its BBB+ rating upward to stable
"The primary driver ... is Moody's expectation that the
downside risks to the fiscal stance that led to the negative
outlook one year ago are abating," the agency said, affirming
the issuer rating at A2.
The government of the right-wing Law and Justice (PiS)
party, which came to power in 2015, narrowed the fiscal deficit
in 2016 to 2.4 percent of gross domestic product (GDP) from 2.6
percent in 2015, despite a significant increase in social
PiS launched in 2016 a child benefit worth about 1 percent
of GDP and passed legislation to reduce the retirement age
starting from late 2017, but improved tax collection as well.
The government now expects the deficit to widen to 2.9
percent of GDP in 2017, but wants to keep it below the European
Union ceiling of 3 percent of GDP going forward.
Moody's also said the investment climate in Poland under the
PiS-led government did not deteriorate significantly.
Expectations of such a deterioration was one of the factors
behind Moody's decision to lower the rating outlook last year.
"Despite some increase in policy uncertainty post-2015
elections, the evidence does not suggest that the investment
climate has materially weakened," Moody's said.
The European Commission has accused the PiS government of
undermining democracy and rule of law following the party's
overhaul of the constitutional tribunal that made it more
difficult for the court to block new legislation.
In early 2016 S&P cut Poland's sovereign rating to BBB+,
saying the PiS government had weakened key institutions,
particularly the constitutional tribunal.
A third major rating agency, Fitch has not altered its
rating on Poland since PiS came to power in 2015, keeping it at
A- with a stable outlook.
Growth of Poland's $468 billion economy slowed last year to
2.8 percent from 3.9 percent in 2015, partly due to reduced
inflows of EU aid.
But blistering growth in Polish industrial and construction
output and retail sales in March prompted at least four
commercial banks to raise their economic growth forecasts for
eastern Europe's biggest economy Poland.
The Finance Ministry expects growth to accelerate to 3.6
percent this year.
(Reporting by Marcin Goettig, editing by G Crosse)