Rating action

Scope Ratings GmbH (Scope) has today affirmed the Republic of Poland’s long-term local- and foreign-currency issuer and senior unsecured debt ratings at A, with Stable Outlooks. The short-term issuer ratings have been affirmed at S-1, in foreign and local currency, with Stable Outlooks.

The affirmation of Poland’s credit ratings reflects: i) sound macroeconomic fundamentals; ii) a strong medium-term growth potential; and iii) moderate, albeit rising, public debt levels, supported by substantial liquidity buffers and a strong domestic investor base. Challenges to Poland’s credit ratings include: i) elevated fiscal deficits, higher interest payments and a rising debt trajectory; and ii) persistent political polarisation risking legislative gridlock and weighing on policy predictability and governance effectiveness.

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Key rating drivers

Sound macroeconomic fundamentals. Poland benefits from a large and diversified economy, supported by strong private consumption, a flexible labour market, and a competitive manufacturing base integrated into European value chains. The country has maintained solid growth and macroeconomic stability over the past decade, demonstrating resilience through external shocks such as the pandemic and elevated inflation.

Poland’s economy grew by 2.9% in 2024, driven by household consumption, supported by rising real wages and government support. The recovery in consumer sentiment and disposable income underpinned robust domestic demand, which more than offset a weaker external environment, with rising imports driven by domestic demand and exports constrained by weak euro area demand. Fixed investment declined in 2024, though public sector activity provided some offset. As a share of GDP, investment remains below pre-pandemic levels.

Scope projects GDP growth at 3.1% in 2025, supported by robust private consumption, underpinned by real income gains and a strong labour market, fading inflationary pressures and a marked acceleration in investment given higher expected absorption of EU structural and Recovery and Resilience (RRF) funds, particularly in infrastructure, energy transition, and digitalisation projects. According to Ministry of Finance estimates, RRF-funded projects alone could contribute approximately 1.1 percentage points to GDP growth in 2025 and 1.0 percentage point in 2026, underscoring the pivotal role of EU funding in driving short- to medium-term growth.

Headline CPI inflation eased to 4.1% y/y in May 2025, though volatility persists due to the phasing out of energy price caps, with a notable rise in July. Scope expects average inflation of 4.1% in 2025, as changes to regulated energy prices continue to impact price dynamics. In May 2025, the Monetary Policy Council cut the NBP reference rate by 0.5 percentage points to 5.25%, reflecting some easing despite lingering inflationary pressures and external uncertainties.

Robust medium-term growth outlook. Poland’s potential growth remains high by EU standards. Scope expects Poland’s economic growth to remain solid over 2026–2030, though it is projected to gradually moderate to around 2.7% by 2030. This reflects Poland’s structural strengths, including a competitive and diversified economy, favourable labour market dynamics, and continued productivity convergence with higher-income EU members. While the scope for further rapid productivity gains is narrowing, Poland continues to benefit from a dynamic economy and labour productivity gains, driven by structural shifts toward more productive services. Demographic pressures, including a shrinking working-age population, are expected to weigh increasingly on growth, although this is partially offset by rising labour force participation and positive net migration, particularly from Ukraine. Moreover, Poland’s positive migration balance marks a favourable structural shift, enhancing Poland’s medium-term economic resilience.

Investment is a key contributor to Poland’s potential growth, with the country being one of the largest beneficiaries of the EU’s Recovery and Resilience Facility (RRF). Its national plan totals EUR 59.8bn (7.1% of 2024 GDP), comprising EUR 25.3bn in grants and EUR 34.5bn in loans. The first disbursement of over EUR 6bn was received in April 2024, followed by EUR 9.4bn in December 2024. These amounts are modest compared to other EU countries, primarily due to earlier delays linked to Poland's non-compliance with EU rule-of-law conditions, which had temporarily blocked access to RRF funds until partial judicial reforms were implemented. Disbursements for the next 12 months are expected to reach around EUR 13bn. This expected inflow supports medium-term growth and strengthens fiscal buffers.

Several risks could hinder timely and full absorption of the funds. Disbursements remain conditional on meeting project-specific milestones, requiring effective coordination and implementation. Political fragmentation and the upcoming presidential transition may delay reforms, with the risk of triggering funding suspensions. Administrative capacity gaps at regional or sectoral levels could slow execution. Lastly, any slippage in transparency or rule-of-law compliance may lead to renewed EU scrutiny or partial fund freezes, undermining medium-term fiscal planning.

However, Poland has received European Commission approval in June 2025 to repurpose EUR 6bn RRF funds toward defence spending, becoming the first EU member state to formally redirect recovery funds for this purpose. The redirected RRF funds are not earmarked for direct military procurement, but rather for dual-use infrastructure, defence-related innovation, and strategic capabilities, in line with EU eligibility criteria. This decision reflects Poland’s heightened fiscal prioritisation of national security, with defence expenditure already nearing 5% of GDP, underscoring the country’s relative flexibility in reallocating EU funding compared to peers.

Moderate public debt levels, supported by substantial liquidity buffers and a strong domestic investor base. Despite recent fiscal loosening, Poland's general government debt remains moderate at 55.3% of GDP in 2024, supported by active debt management. A significant cash buffer of 5% of GDP and access to a deep domestic capital market mitigate refinancing risks. The debt structure remains anchored in domestic currency, helping to limit exchange rate risk.

Scope forecasts Poland’s public debt levels to remain moderate, despite a gradual increase over the medium term. General government debt is projected to rise to around 66% of GDP by 2029 (EU definition), before stabilising through 2030. Under Poland’s national definition, Scope expects the debt level to reach around 55% of GDP by 2029, which corresponds to the first legal threshold defined in the country’s Public Finance Act. This law mandates automatic fiscal adjustments if debt crosses the 55% and 60% of GDP thresholds, including stricter expenditure controls and balanced budget requirements. These strict rules thus help anchor long-term fiscal discipline and support Scope’s debt trajectory baseline, acknowledging that they can be temporarily suspended under exceptional circumstances (e.g. national emergencies).

Moreover, Poland’s gradually rising debt trajectory reflects persistent but narrowing primary deficits, from -4.0% of GDP in 2024 to -1.0% by 2030, which are driven by expected automatic revenue gains (including fiscal drag from frozen tax thresholds amid rising wages) and moderating expenditure. Debt sustainability is further supported by strong real GDP growth and a declining effective interest rate, from 4.4% in 2024 to 3.7% by 2030. Assuming continued economic momentum and contained inflation, Poland’s debt-to-GDP ratio is expected to stabilise over the long term at around 66% of GDP, below the 2024 EU average (81%), helping to contain fiscal risks despite elevated structural budget pressures.

Rating challenges: elevated fiscal deficits, higher interest payments and a rising debt trajectory; persistent political polarisation risking legislative gridlock and weighing on policy predictability and governance effectiveness.

A key structural constraint on Poland’s long-term credit profile is the persistence of elevated budget deficits, with the general government deficit widening to 6.6% of GDP in 2024, up from 5.3% in 2023, and a projected 6.2% in 2025. The 2024 deterioration was primarily driven by weaker-than-expected VAT revenues due to subdued private consumption, combined with one-off spending on public sector wages and accelerated defence expenditures. In 2025, a modest improvement is expected, largely due to expenditure-side adjustments, including the phasing out of energy price support measures.

While ongoing social programmes will continue to exert pressure on public finances, revenue growth is expected to be supported by a combination of slower wage growth and fiscal drag effects stemming from the freezing of personal income tax thresholds and unchanged tax-free allowances. These measures effectively increase the tax burden over time, as high nominal income growth pushes taxpayers into higher brackets, thereby generating additional revenue without changes to headline tax rates. Over time, structural expenditure pressures, including those related to defence, pensions, and healthcare, could further complicate fiscal consolidation efforts without accompanying revenue or reform measures.

Poland’s interest payment burden has increased steadily in recent years, reflecting higher borrowing needs and the impact of tighter financing conditions. Interest payments rose from 3.2% of revenues in 2020 to 5.1% in 2024, with a further increase to an estimated 5.6% in 2025, and are projected to reach 6.1% of revenues by 2030. Although the effective interest rate is expected to gradually decline in line with moderating inflation, the debt accumulation contributes to an increasing interest burden over the medium term. This development may reduce fiscal space and limit the government’s ability to respond to future shocks or invest in priority areas without additional revenue measures or spending reprioritisation.

Finally, elevated political fragmentation and limited reform traction present ongoing challenges to policy predictability and governance effectiveness. The outcome of the 2025 presidential election has reinforced a fragmented and polarised political environment, constraining the government’s capacity to implement its legislative and fiscal agenda, weighing on policy predictability and governance effectiveness. Presidential veto powers and the composition of the constitutional court pose structural barriers to reform, particularly in areas requiring broad political consensus. These institutional constraints are expected to slow fiscal consolidation, as politically sensitive expenditure reforms may face delays or dilution. Elevated risks of legislative gridlock further increase uncertainty surrounding the medium-term fiscal outlook. On 11 June 2025, the Donald Tusk government won a confidence vote, securing near-term political stability. Still, coalition tensions and the newly elected opposition-aligned president may continue to weigh on legislative effectiveness and reform implementation.

Rating-change drivers

The Stable Outlook represents the opinion that risks for the ratings are balanced over the next 12 to 18 months.

Upside scenarios for the long-term ratings and Outlooks are if (individually or collectively):

1. The economy’s external balance sheet was to further strengthen materially;
    
2. Fiscal performance improves, supporting a structurally declining trajectory for the government debt ratio; and/or
    
3. Social and environmental risks are significantly redressed, enhancing long-run sustainable growth.

Downside scenarios for the ratings and Outlooks are if (individually or collectively):

1. Weaker budgetary outcomes result in a substantial rise in the public debt trajectory;
    
2. Weaker economic growth, for example, due to an external shock, significantly undermining Poland’s external-sector risk profile; and/or
    
3. Political polarisation and/or governance challenges curb the government’s ability to implement reforms and/or absorb EU funds.

Sovereign Quantitative Model (SQM) and Qualitative Scorecard (QS)

Scope’s SQM, which assesses core sovereign credit fundamentals, signals a first indicative credit rating of ‘a+’ for Poland, which was approved by the rating committee. Under Scope’s methodology, the indicative rating receives no positive adjustment from the methodological reserve-currency adjustment; and 2) no negative adjustment from the methodological political-risk quantitative adjustment. On this basis, a final SQM quantitative rating of ‘a+’ is reviewed by the Qualitative Scorecard (QS) and can be changed by up to three notches depending on the size of Poland’s qualitative credit strengths or weaknesses compared against a peer group of sovereign states.

Scope identified the following QS relative credit weaknesses for Poland: 1) resilience to short-term external shocks; 2) governance; and 3) environmental factors. Conversely, Scope identified the following QS relative credit strength for Poland: 1) macro-economic stability and sustainability. On aggregate, the QS generates a negative one-notch adjustment for Poland, resulting in final A long-term ratings.

A rating committee has discussed and confirmed these results.

Factoring of environment, social and governance (ESG) 

Scope explicitly factors in ESG sustainability issues during the ratings process through the sovereign rating methodology’s stand-alone ESG sovereign risk pillar, having a significant 25% weighting under the quantitative model (SQM) and 20% weighting under the analyst-driven Qualitative Scorecard.

Poland’s environmental profile faces persistent structural challenges, particularly in relation to its slow progress in decarbonisation and the diversification of its energy mix. Despite the availability of EU Recovery and Resilience Facility funds, the transition away from coal remains gradual, with coal still accounting for a large share of electricity generation and only modest advances in wind and solar capacity. Per capita carbon emissions remain high relative to EU peers, reflecting the limited transformation of emission-intensive sectors such as power, transport, and heating. In addition, while environmental spending needs are expected to rise—particularly for climate adaptation and energy efficiency—competing fiscal priorities have constrained the pace of green investment. These factors drive Scope’s ‘weak’ environmental assessment of Poland.

Poland’s social profile is shaped by significant demographic headwinds and structural labour market challenges. The rising old-age dependency ratio is expected to increase long-term fiscal and growth pressures, as the working-age population gradually declines. While overall labour force participation is relatively high, persistent shortages—particularly in skilled occupations—highlight limitations in labour market adaptability. Participation remains uneven across demographic groups, including youth, older workers, and persons with disabilities, suggesting untapped labour potential. Ongoing reforms in pensions, education, healthcare, and skills development aim to strengthen labour market resilience and support fiscal sustainability over the long term, underpinning Scope’s ‘neutral’ social assessment.

Poland’s governance profile is characterised by elevated political polarisation. While the country performs moderately on the World Bank Worldwide Governance Indicators, it lags behind most EU peers, particularly in areas such as judicial independence. Persistent tensions between the executive and judiciary, along with frequent institutional confrontations, have weighed on policy predictability. High political polarisation continues to undermine consensus-building and may hinder progress on critical structural reforms, especially in areas requiring cross-party cooperation or constitutional change. These factors drive Scope’s ‘weak’ governance assessment.

Rating Committee
The main points discussed by the rating committee were: i) domestic economic risk; ii) public finance risk; iii) external economic risk; iv) financial stability risk; v) ESG-related risk; and vi) rating peers.

Methodology
The methodology used for these Credit Ratings and/or Outlooks, (Sovereign Rating Methodology, 27 January 2025), is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The model used for these Credit Ratings and/or Outlooks is (Sovereign Quantitative Model Version 4.0), available in Scope Ratings’ list of models, published under https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With Rated Entity or Related Third Party participation     YES
With access to internal documents                                   YES
With access to management                                            YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain and the Rated Entity.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and/or Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlooks are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlooks are UK-endorsed.
Lead analyst: Jakob Suwalski, Executive Director
Person responsible for approval of the Credit Ratings: Alvise Lennkh-Yunus, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings in January 2003. The Credit Ratings/Outlooks were last updated on 26 July 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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