Fitch rating agency affirmed credit rating of Poland. Stable rating outlook has not been changed either.
On 15 July 2016 rating agency Fitch Ratings announced a decision about keeping Poland's credit rating unchanged at the level of A-/F2 for long and short term liabilities respectively in foreign currency and A for long term liabilities in local currency. Rating's outlook remained unchanged at stable level.
In its press release justifying the decision Fitch highlights solid macro fundamentals of Polish economy, which are reflected in strong GDP figures. Agency forecasts GDP growth at the level of 3.2%-3.3% in the years 2016-2018, which will be supported mainly by private consumption. Strong labour market and increase in governments' transfers to families (Family 500+ Programme) will contribute the most to consumption growth. In the Finance Minister's opinion agency's projections are rather conservative, given market consensus for that period at 3.3%-3.5% level. MoF estimates a higher pace of GDP growth. However we share the agency's opinion that domestic demand will be the main contributor to growth, especially households' consumption, which is also favourable for general government revenues.
Fitch analysts point out that increased expenditures of the state budget will be financed by stronger tax revenues reflecting improved economic conditions and better VAT compliance. Agency forecasts gradual contraction of budget deficit starting from 2018. At the same time the agency underlines that Government of Poland has made a commitment not to breach 3% level of general government deficit to GDP ratio, which is confirmed by deficit projections made by Fitch. In MoF's view, Fitch analysts recognise positive effects of undertakings in the area of tax system tightening done since the beginning of the current government's term.
According to the press release the banking system in Poland is well capitalized, liquid and profitable. The sector's results may be negatively affected by possible CHF mortgages conversion. However, agency noted government's stance aimed at keeping financial stability of the sector. Fitch agency noticed that changes in the composition of the Monetary Policy Council has not led to a change in the conduct of monetary policy. Poland's external position is on improving trend resulting from improved economy's competitiveness and fall in commodity prices. Agency anticipates net external debt to decrease.
Fitch indicates factors that could positively trigger credit rating of Poland as continued high GDP growth, income convergence to higher rated countries and continued reduction in external debt ratio supported by stronger current account balances and capital inflows. Among factors that could have a negative impact on the rating agency points to breaching of 3% deficit limit, conversion of CHF mortgages in the way that could threaten stability of the banking sector and potential negative influence of Brexit on economy.