Among the reasons for such an assessment agency mentioned, among others, Fiscal risks associated with a significant increase in current expenditure, as well as the government’s intention to reduce the retirement age.
When it comes to expenses, the agency pointed to the benefits of children (under the Family 500 plus), noting that they will raise expenses current approx. 17 billion zł in 2016. (0.9 percent. GDP) and 23 billion zł in 2017. (1,1 per cent. of GDP). Agency estimated that fiscal risk will increase in 2017. “If you take into account the government’s reliance on disposable income and more efficient tax collection, to finance benefits for children.” At the same time – analysts point out – “the government has signaled that it will raise the tax-free amount of 1000 zł each subsequent year until it reaches 8,000 zł.” “The resulting loss in revenue will amount to approx. 4 billion zł (0.2 per cent. Of GDP) in 2017., And will then progressively grow. These instruments complicate authorities’ commitment to (not exceeded) the threshold of 3 per cent budget deficit. GDP the coming years “- says.
Moody’s also pointed to the deterioration of the investment climate in Poland under the” shift towards a more unpredictable policies and legislation. ” In this context, the agency says, about “ambiguities” in relation to “the conversion of mortgage loans denominated in foreign currency” and “protracted stalemate” in the dispute between the government and the Constitutional Court.
Analysts consider, among others that the proposed conversion of loans “to the extent unfavorable conditions for banks could also have a significant impact on the supply of loans, with consequences for private consumption and investment.” At the same time in support of maintaining the rating agency points to the country’s economic resilience, which is reflected, among others, the diversification of the economy, which “showed strong real GDP growth, regardless of the adversity from the outside.”
Moody’s expects real GDP growth in Poland at the level of approx. 3.5 per cent. 2016 and 2017. In the long term – according to the agency – the path of Polish growth harm can: low regional and professional mobility, subdued rate of women’s participation, market segmentation and high youth unemployment.
The agency also points to factors that may affect the rating in the future. “The deterioration of the fiscal position of the government and / or deterioration of the investment climate following the implementation of the proposed government measures could generate downward pressure on the rating and lead to (his) reduction” – we say. “At the same time prolonged (or escalating) the conflict between the government and the Constitutional Court, leading to significant outflows could also exert downward pressure on the rating,” – adds Moody’s.
On the other hand, among the factors that can exert pressure to raise the rating agency lists: fiscal consolidation leading to a reduction in the structural deficit, improving the long-term sustainability of the social security system, as well as the institutional framework.
So far, Polish agency Moody’s had an assessment of A2 with a stable outlook.
Before the publication of the rating, economists talked about the different options possible decision by Moody’s. They pointed to the possibility of lowering the prospects to negative, while leaving the rating at A2 level. Much of the expected, but also cut the rating to A3 level. Less often talked about cutting the rating of maintaining a stable perspective.
In mid-January the rating agency Standard & amp; Poor’s cut its long-term rating for the Polish debt in foreign currency to the level of “BBB plus” from “A minus”. It indicated that the rating outlook is negative. In justifying the decision, S & amp; P wrote that “from winning the election in October 2015., The new Polish government initiated various legislative measures that we believe undermine the independence and effectiveness of key institutions as a result of our institutional assessment.” Finance Minister Paul Szałamacha rating in response to the decision of S & amp; P, that does not take into account the economic phenomena, focusing on politics. According to him, the rating agency “najnormalniej in the world is wrong” and the Polish economy is doing great. Downgrade by S & amp; P caused a sharp weakening of the zloty. Also increased the profitability of Polish bonds, which means higher costs of debt service.
After the decision of S & amp; P its assessment issued by Fitch, which kept the rating Polish unchanged at A- and A (respectively liabilities in foreign currencies and national currency) with a stable outlook. Moody’s, despite indications Jan. 15 as a possible date of publication of the rating Polish, did not present it. In early April, Moody’s suggested, however, that the continuing political dispute over the Constitutional Court may weigh negatively on the evaluation rating.
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