Moody’s says Poland bond ratings “strong”

Poland's A2 government bond ratings are supported by high economic, institutional and government financial strength, Moody's Investors Service said in its new sovereign credit report on Poland. The rating outlook is stable, although the report expresses concerns surrounding steeply rising fiscal deficits and deteriorating government debt metrics in the aftermath of the economic crisis, as well as slowed economic growth potential.
"Poland's economy amply demonstrated its resiliency through the global economic crisis," said Kenneth Orchard, Senior Credit Officer in Moody's Sovereign Risk Group. "After expanding by 5% in 2008, real GDP growth is expected to be over 1% in 2009, making Poland the only country in the EU able to avoid a recession."
Moody's believes that ongoing integration into the broader European economy should ensure that real income convergence with the Eurozone continues over the medium term, although the pace is likely to be slower than pre-crisis.
Moody's also believes that Poland's institutional strength has improved in recent years, although challenges lie ahead. "Some limited structural reforms have improved the stability of fiscal policy, despite a somewhat noisy political environment, and disciplined monetary policy has kept inflation in check," explained Orchard.
Poland's institutions are expected face difficult policy choices over the next few years that will have longstanding economic implications for the country. Moreover, the choices will be complicated by upcoming elections and the continuation of slow economic growth.
Moody's assesses that the government's financial strength has weakened slightly over the past two years. The fiscal situation has deteriorated significantly and debt ratios are now rising. "However, these concerns are partly alleviated by the favourable currency and maturity structure of the debt, supported by deep local capital markets that act as a natural buyer of government securities," said Orchard. Susceptibility
to event risk is also low, reflecting an economy less dependent on external debt capital than most other countries in the region.