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Fitch: Likely Poland EDP Exit Highlights Consolidation Success
May 15, 2015 / 12:36 PM / 3 years ago

Fitch: Likely Poland EDP Exit Highlights Consolidation Success

(The following statement was released by the rating agency) LONDON, May 15 (Fitch) The European Commission's recommendation that Poland should leave the Excessive Deficit Procedure (EDP) highlights the effectiveness of Poland's deficit reduction strategy and the positive fiscal impact of a strong economic performance, Fitch Ratings says. We expect the general government deficit to remain below the 3% of GDP threshold in the medium term. Sustained fiscal consolidation has cut Poland's general government deficit from 4.0% in 2013 to 3.2% last year. We forecast a further fall to 2.8% this year. Fiscal tightening primarily reflects the impact of accelerating real GDP growth (3.4% in 2014 after 1.7% in 2013) on revenues, the impact of the reform of the pension system on social contributions, and lower interest payments. The introduction of an expenditure rule to limit the growth in government spending from one year to the next, also contributed to tighter spending control in 2014. We think the general government deficit will remain 2.5%-3% in the medium term. This is consistent with our expectation that GDP will continue to grow above 3% per year, revenues will benefit from new measures to increase tax compliance and VAT receipts and expenditure will remain under control. Our deficit forecasts are consistent with a stabilisation of government debt at slightly below 50% of GDP (in line with ratings peers). But a sustainable decline in government debt that would be positive for the rating would be more likely if deficits fell further, below the 2.5%-3.0% range. Poland's electoral cycle may present risks to consolidation. Parliamentary elections are scheduled for October, and the strong showing by the opposition Law and Justice Party's candidate in May's presidential elections (a run-off vote will be held later in May after an inconclusive first poll) could put political pressure on the government to increase spending. The Commission said this week that "the conditions are now fulfilled for an early closure of Poland's Excessive Deficit Procedure." The 2014 deficit was 3.2% of GDP, according to Eurostat, but this in part reflected costs associated with pension reforms enacted in 1999. Without these, the deficit would have been below the Stability and Growth Pact's 3% limit. The final decision will be taken by the Council of Ministers in June. Poland has been under the EDP since 2009. Contact: Arnaud Louis Director Sovereigns +33 1 44 29 91 42 Fitch France S.A.S. 60 rue de Monceau Paris 75008 Mark Brown Senior Director Fitch Wire +44 203 530 1588 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email:; Athos Larkou, London, Tel: +44 203 530 1549, Email: The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings. Applicable Criteria and Related Research: Poland here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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