April 18, 2018 / 2:37 PM / a year ago

S&P analyst says Poland's rating upgrade will hinge on deficit

WARSAW (Reuters) - Poland’s credit rating might be raised if its fiscal deficit stays around 2 percent of gross domestic product for the next two years, an analyst for S&P Global Ratings said on Wednesday.

The ratings agency changed its the outlook on Poland’s rating to positive from stable last week, citing the country’s economic and fiscal performance. It still has the lowest rating of the three major rating agencies - BBB+ compared with Fitch’s A- and Moody’s A2, both with a stable outlook.

“If you look at our projections - our deficit of 2 percent this year and some widening in 2019 - we still think that those are compatible, public debt to GDP ratio being stable,” Frank Gill, S&P’s lead analyst for Poland, told Reuters.

“We think that, if our projections are more or less realized, this is compatible with a higher rating,” he said.

Poland’s economic growth accelerated to 4.6 percent last year and the fiscal deficit fell to 1.5 percent of GDP, its lowest level in more than two decades. Public debt fell nearly 4 percentage points to 50.6 percent of GDP.

Analysts polled by Reuters expect the deficit to widen to 2.0 percent of GDP in 2018 and 2.3 percent in 2019.

“A lot of economies would like to have Poland’s problems. One problem is an extremely tight labour market,” Gill said.

The S&P analyst also said recently announced spending measures and tax cuts were not a risk for this year’s budget.

“I think it is further fiscal stimulus,” Gill said. “We have been consistently saying that the fiscal position is already pro-cyclical, but at the same time we think it is sustainable. We think that public debt to GDP is going to be stable.”

Reporting by Marcin Goettig, editing by Larry King

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