S&P Cuts Poland’s Local Currency Rating to A-, Turns Outlook Negative on 7.1% Deficits
S&P Global Ratings cut Poland’s local currency rating one notch to A- and turned its outlook negative, projecting average general government deficits above 6% of GDP in coming years.
For investors in zloty government bonds the change is concrete: the agency no longer rates Poland’s local currency debt above its foreign currency debt, judging that fiscal strain now weighs on both equally. The foreign currency rating stays at A-, but a negative outlook on both scales leaves room for a further cut if lasting deficits and rising debt start to put growth at risk.
The agency aligns the zloty rating with the foreign currency rating
The action was published at 21:01 GMT on 6 November. It affirmed the long and short term foreign currency ratings at A-/A-2 and lowered the local currency ratings to the same level from A/A-1. The outlook on both long term ratings moved to negative from stable.
The cut runs through the rated zloty debt. Each zloty bond series on the agency’s list was lowered to A-, with maturities running out to 2047, and the Treasury bill programme moved to A-2. Two local currency lines under the €85 billion medium term note programme were revised in the same way.
The agency said Poland’s reduced institutional and fiscal flexibility drove the local currency cut. Given large fiscal imbalances and difficult policymaking, it now judges the government’s willingness and ability to service zloty debt to be equal to its foreign currency debt. It reached that view despite what it called a sound monetary policy framework and deep domestic capital markets.
Under its sovereign criteria, the agency does not separate the two scales when a government’s fiscal position is a disproportionate credit constraint. Its component scores show where that constraint sits. Fiscal flexibility and performance scores 6, the weakest mark on its scale, while the economic, external and monetary assessments each score 2.
The agency’s ratings on Poland
| Rating | Before | After |
|---|---|---|
| Foreign currency, long term | A- Stable | A- Negative |
| Foreign currency, short term | A-2 | A-2 |
| Local currency, long term | A Stable | A- Negative |
| Local currency, short term | A-1 | A-2 |
| Zloty bonds, MTN senior | A | A- |
| Treasury bills, MTN short term | A-1 | A-2 |
| Transfer and convertibility | A+ | A+ |
From the agency’s ratings list and regulatory ratings actions of 6 November 2026 (21:00 to 21:01 GMT); MTN is the €85 billion medium term note programme of 18 March 2024, whose revised lines are local currency; foreign currency senior unsecured debt stays at A-.
Fitch Ratings moved its own A- rating on Poland to a negative outlook on 5 September 2025. It affirmed both on 21 August 2026, so the two agencies now carry the same rating with the same negative outlook.
Net debt passes 70% of GDP by 2029 in the agency’s projections
The case rests on the pace of borrowing. The agency projects net general government debt at 70.5% of GDP in 2029, up from 53.1% in 2025. Measured from 2024, the rise exceeds 20 percentage points over five years, a deterioration the agency ranks among the most significant anywhere.
Deficits drive it. Eurostat’s figures, set out here on 22 October, put Poland’s 2025 deficit at 7.2% of GDP, second only to Romania in the EU. In nominal terms it was PLN 283.6 billion, equivalent to $72.13 billion.
The ratio has more than doubled from 3.4% in 2022. It is also 2.3 times the EU average of 3.1%.
The agency sees little relief soon, projecting the deficit at 7.1% of GDP this year and again next year. Only in 2028 does it narrow, to 6.2%. The last projected year still shows 5.3%, well above the EU’s 3% reference value.
High defence spending, rising social outlays and the public sector wage bill lie behind the gap, the agency said. It estimates total defence spending at just under 5% of GDP this year, and puts the primary deficit, before interest, at an estimated 4% of GDP.
It expects no meaningful consolidation before the parliamentary elections due in autumn 2027. A presidential veto on some smaller revenue measures, and a tax reform passed by the Sejm but not yet signed, leave the revenue side uncertain in its account.
Beyond the election, Poland’s constitutional debt limits could force sharp consolidation by 2029 and 2030, the agency warned, unless rising funding costs trigger an earlier adjustment. It expects either path to be recessionary.
Debt also rises faster than the deficits alone suggest. Under EU accounting rules, military equipment adds to debt when it is paid for but enters the deficit only on delivery. The agency’s estimates also include the Polish Development Fund and BGK Bank, whose armed forces support fund sits outside the national debt rules.
The agency’s fiscal path for Poland (in % of GDP)
| Measure | 2025 | 2027 | 2029 |
|---|---|---|---|
| Deficit | 7.2 | 7.1 | 5.3 |
| Net debt | 53.1 | 64.4 | 70.5 |
| Gross debt | 59.6 | 70.3 | 75.7 |
General government, from the agency’s selected indicators of 6 November 2026; 2025 is the latest full year and 2026 to 2029 are the agency’s base case; net debt is debt net of liquid assets; the agency’s 2026 figures are 7.1, 59.3 and 65.6, and its 2028 figures 6.2, 67.8 and 73.3.
Gross debt rises 16.1 percentage points from 2025 to 2029, to 75.7% of GDP. The interest bill climbs with it: interest took 5.8% of government revenue in 2025, on the agency’s figures. It projects 8.4% by 2029.
Poland still starts from a lower base than the EU as a whole. Its gross debt was 59.6% of GDP last year, against an EU average of 81.5% on the same data.
Growth near 3% and a narrower state budget gap offer cushions
The economy is a key support for the rating. The agency expects growth of 3.6% this year as EU funded investment peaks, then 2.9% a year to the end of its forecast. The economy grew 4.1% in the second quarter, with fixed investment up 8.5%, it noted.
EU money is central to that path. Poland is eligible for €55 billion from the Recovery and Resilience Facility by the end of this year, and the agency puts disbursements at an estimated €42 billion. It has also been allocated €44 billion of low interest defence loans under the EU’s Security Action for Europe programme, which the agency expects to soften the end of the facility.
The buffers look solid. Official reserves equal an estimated five months of current account payments on the agency’s figures, and it puts the general government’s cash buffer at an estimated 6% of GDP. The weak link is the banks: government debt makes up more than 25% of their assets, which could amplify stress if yields jump.
Inflation is easing. Statistics Poland’s flash estimate put October consumer prices 3.5% higher than a year earlier; the agency cites 4.1% for September. Narodowy Bank Polski left its reference rate at 3.75% on 4 November, and the agency expects no change this year.
Government cash data also run ahead of last year. The Ministry of Finance put the state budget deficit for January to September at PLN 172.2 billion, equivalent to $43.79 billion. That was 14.5% smaller than the PLN 201.4 billion of a year earlier.
The gap used 63.4% of the full year plan, against 69.8% a year earlier. Revenue rose 5.6%, helped by a 30.3% jump in corporate income tax. Spending fell 1%.
Defence took PLN 70.9 billion, 11.6% of state spending. Servicing Treasury debt cost PLN 55.2 billion, equal to 12.6% of revenue.
In The Edge’s reading, the narrower state budget gap does not settle the argument. The agency rates on the wider general government, whose debt in its estimates includes the Polish Development Fund and BGK Bank. Defence prepayments also add to that debt before they reach any deficit.
Ratings and projections are from S&P Global Ratings’ research update “Poland Outlook Revised To Negative; ‘A-/A-2’ Foreign Currency Ratings Affirmed; Local Currency Lowered To ‘A-/A-2′” and its regulatory ratings actions, both of 6 November 2026; history is from Eurostat’s release of 21 October 2026, the state budget from the Ministry of Finance’s January to September estimate of 15 October 2026, prices from Statistics Poland’s flash estimate of 30 October 2026 and rates from Narodowy Bank Polski’s decision of 4 November 2026. Dollar equivalents use the central bank’s average rate of 3.9321 zloty per dollar on 6 November 2026. Percentages and comparisons not attributed to a source are The Edge’s calculations.
Sources: S&P Global Ratings, Eurostat, Ministry of Finance of Poland, Statistics Poland, Narodowy Bank Polski, Fitch Ratings, The Edge.
