|Poland recently suspended its fiscal rules, which gave the rating agency reason for pause|
Ratings agency Fitch has revised Poland’s sovereign rating outlook from positive to stable citing factors such as higher general government deficit and reduced fiscal credibility. In February this year, the agency had raised the outlook from stable to positive.
“Following a budget revision in July, Fitch forecasts the headline general government deficits (GGD) in EU-harmonised (ESA 95) terms to be 4.2% of GDP in 2013, reflecting mainly weaker GDP growth. This is 0.7pp of GDP higher than the government's own forecast in the April Convergence Programme, and 1pp higher than when Fitch assigned a Positive Outlook in February 2013,” the company said.
“The upward revision to deficit forecasts entails a later peak in gross general government debt than Fitch previously assumed,” Matteo Napolitano, a Fitch analyst said. The suspension of the government spending rules and in consequence of the debt limits has “reduced the credibility of Poland’s rules-based fiscal framework.”
It’s “hard to agree with” Fitch’s assessment of the change in fiscal rules, Deputy Finance Minister Wojciech Kowalczyk wrote in an e-mailed statement to Reuters. The rule will allow Poland to “maintain sustainable fiscal discipline,” he concluded.
While downgrading the outlook, Fitch maintained Poland’s long-term foreign and local currency Issuer Default Ratings at A- and A respectively. It also affirmed the country’s short-term rating at F2 and the country ceiling at AA-.
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