Poland enjoys strong economy, low risk, says Moody’s

Poland's A2 government bond ratings are supported by the country's high economic and institutional strength, Moody's Investors Service said in its new sovereign credit report on Poland. The outlook for the ratings is stable.
"Even though GDP per capita is lower than other Central European countries, Poland's economy is significantly larger than most other countries in the region, a scale that coincides with an important degree of stability and diversification," explained Kenneth Orchard, a Vice President–Senior Analyst in Moody's Sovereign Risk Group.
While growth has been hampered by the slow pace of structural reform, Moody's believes that continued integration with the rest of the European Union is likely to bring a moderate pace of real income convergence with the Eurozone over the medium term and also enhance long-term growth potential for Poland. "This should allow Poland's economic convergence to begin to catch up to other countries in the region," Orchard said.
Moody's assessed Poland's institutional strength as high, based on a noticeable improvement in the quality of governance in recent years. Indeed, policies have become much more stable and predictable, despite a somewhat noisy political environment.
Moreover, Moody's rates Poland's susceptibility to political, economic and financial event risk as low.
"Implicit in Moody's assessment is the assumption that the current global liquidity problems will not destabilise the economy and banking sector," Orchard said. "While imbalances in the Polish economy have increased over the past few years, the overall levels have remained reasonable compared to its peers."
Moody's points out that Poland's debt metrics are on the high side compared to most other new EU members and other countries in the same ratings category.
"Nevertheless, most of the debt is denominated in local currency at fixed rates with long maturities, and legislation is in place that restricts the debt/GDP ratio below the Maastricht criteria of 60%," Orchard clarified.
The outlook on Poland's ratings is stable. "Moody's recognises that Poland's economy and government finances are likely to be negatively affected by the global liquidity crisis, but the impact is expected to be only temporary," said Orchard.