Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for the Republic of Poland (long-term local- and foreign-currency issuer and senior unsecured debt ratings: A+/Negative; short-term local- and foreign-currency issuer ratings: S-1+/Negative) on 7 December 2022.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

Poland’s A+ credit ratings reflect a number of credit strengths, including sound macroeconomic fundamentals and comparatively strong rates of nominal economic growth anticipated of past years, also aided by elevated inflation. Scope expects 5.7% real growth this year before slowdown to 1.5% in 2023 and 2.9% in 2024. Poland’s economy has been to date comparatively resilient over dual Covid-19 and Russia-Ukraine crises and displays comparatively strong longer-run economic growth potential. Further credit strengths reflect moderate levels of public debt and financing requirements, a sizeable cash cushion and deep domestic capital markets. Poland’s ratings are anchored by a profitable, liquid and well-capitalised domestic banking system.

In June, the European Commission (EC) conditionally approved Poland’s Recovery and Resilience Plan (RRP). Uncertainty remains, however, with respect to disbursement of EU funding linked to the RRP as defined milestones have not been met. Furthermore, Poland’s European Cohesion funding under the 2021-27 EU budget has been placed on hold, due to failure to satisfy ‘enabling conditions’ of primacy of the rule of law.

Poland’s ratings are challenged by: i) a longer-standing trend of weakening of governance institutions, raising uncertainty around predictability of European Union (EU) funding; ii) a marked deterioration of the inflation outlook; iii) economic and geopolitical risks associated with escalation of the Russia-Ukraine war; iv) a comparatively weaker structure of government debt and rises of government expenditure; and v) social and environmental risks.

The Negative Outlook represents Scope’s opinion that risks to the sovereign ratings remain skewed to the downside.

The ratings could be downgraded in the event of, individually or collectively: i) governance risks and/or associated tensions with the European Union continuing or escalating absent significant resolution, with associated growing adverse implications as regards institutional and/or economic outlooks; ii) weaker budget discipline resulting in weakening of an outlook as regards debt sustainability; and/or iii) a global or regional shock bringing output attrition and/or Poland’s external-sector risk profile weakening.

Conversely, the Outlooks could be revised to Stable if, individually or collectively: i) governance risks and associated tensions with the European Union were more substantively reduced, materially curtailing associated implications as regards institutional and economic outlooks; ii) budgetary performance were to improve, bringing anticipation of a decline of government debt/GDP beyond present baseline expectations; and/or iii) the country’s external balance sheet were to strengthen materially.

For the updated rating report accompanying this review, click here.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 September 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Dennis Shen, Director

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