WARSAW: Fitch Ratings downgraded its credit outlook for Poland to stable from positive on Friday for the first time in years, citing the government's decision to soften its fiscal discipline and let the budget deficit widen this year.
As recently as February, Fitch revised the outlook to positive from stable. Fitch's move late on Friday comes after Poland's government approved a draft bill to raise the cap on this year's budget deficit by 16 billion zlotys, or about 1 per cent of GDP, to 51.6 billion.
The government also suspended, as a necessary pre-condition for the budget revision, one of the rules that effectively cap public debt. The agency said this step had "reduced the credibility of Poland's rules-based fiscal framework".
While most European states were in recession after the 2008 global crisis and having their ratings downgraded, Poland's economy kept growing and its rating stood firm.
In a comment on the Fitch move on Friday, the Polish Finance Ministry said it disagreed with the agency that changes in the fiscal rules potentially weakening Poland's credibility.
"The new spending rule, due to its anti cyclical nature, will serve sustained public finance discipline," the ministry said.
Since at least 2005, the only changes in Fitch's rating outlook for Poland has been upward, while the rating itself has remained unchanged at "A-" since 2007, according to Reuters data.
When the agency raised Poland's rating outlook to positive in February, it cited the government's successful deficit reduction and ongoing reforms that may boost the economy's rebound from its current slowdown.
All Poland's ratings are comfortably within the 'investment grade' bracket. Moody's rates Poland at A2 and Standard & Poor's and Fitch at A-. At the same time as lowering the outlook, Fitch kept Poland's "A-" rating citing a resilient economy, improving external finance and a solid banking sector.
The agency sees Poland's Gross Domestic Product increasing to 2.4 and 3 per cent in 2014 and 2015 respectively from the 1.2 per cent expected this year.
"Nevertheless, Poland remains exposed to eurozone developments via extensive trade and financial links," Fitch said.
indiatimes.com
As recently as February, Fitch revised the outlook to positive from stable. Fitch's move late on Friday comes after Poland's government approved a draft bill to raise the cap on this year's budget deficit by 16 billion zlotys, or about 1 per cent of GDP, to 51.6 billion.
The government also suspended, as a necessary pre-condition for the budget revision, one of the rules that effectively cap public debt. The agency said this step had "reduced the credibility of Poland's rules-based fiscal framework".
While most European states were in recession after the 2008 global crisis and having their ratings downgraded, Poland's economy kept growing and its rating stood firm.
In a comment on the Fitch move on Friday, the Polish Finance Ministry said it disagreed with the agency that changes in the fiscal rules potentially weakening Poland's credibility.
"The new spending rule, due to its anti cyclical nature, will serve sustained public finance discipline," the ministry said.
Since at least 2005, the only changes in Fitch's rating outlook for Poland has been upward, while the rating itself has remained unchanged at "A-" since 2007, according to Reuters data.
When the agency raised Poland's rating outlook to positive in February, it cited the government's successful deficit reduction and ongoing reforms that may boost the economy's rebound from its current slowdown.
All Poland's ratings are comfortably within the 'investment grade' bracket. Moody's rates Poland at A2 and Standard & Poor's and Fitch at A-. At the same time as lowering the outlook, Fitch kept Poland's "A-" rating citing a resilient economy, improving external finance and a solid banking sector.
The agency sees Poland's Gross Domestic Product increasing to 2.4 and 3 per cent in 2014 and 2015 respectively from the 1.2 per cent expected this year.
"Nevertheless, Poland remains exposed to eurozone developments via extensive trade and financial links," Fitch said.
indiatimes.com
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