Among the reasons for such an assessment, Moody’s 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 program “500+ Family”), stressing that they will raise current expenditures of 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 reliance of the government on disposable income and more efficient tax collection, to finance benefits for children.”
At the same time – mark analysts – “the government has signaled that 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.
The deterioration of the investment climate in Poland
Moody’s pointed also 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 believe m. al., 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.”
Resistance country’s economic
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. “trafficking in net increasingly driving growth while investment and private consumption are limited by lower confidence and access to credit.” In the long term – according to the agency – Polish path of growth may harm: low regional and professional mobility, subdued rate of women’s participation, market segmentation and high youth unemployment.
What can affect the rating in the future?
The agency also points out the 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 prospects, the 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.
Joanna Mucha, Member of PO and Margaret Gosiewska, PiS MP of the decision Moody’s:
Comments Ministry of Finance
Commenting on the decision of the Ministry of Finance draws attention to the fact that on 26 April the Council of Ministers adopted a Multi-annual Financial Plan for the years 2016-2019.
It shows that the public sector deficit in 2017 is set below 3 percent, and in subsequent years gradually decline to 1.3 percent in 2019 years. To achieve this purpose, a series of activities of the Ministry, including among other things, adopted on May 13 by the Parliament of an amendment to the Tax Code and a package sealing liquid fuels market, approved by the Standing Committee of the Council of Ministers on May 12.
Finance Minister: Moody’s rating objective, the forecast for discussion
The Finance Minister believes that maintained by the agency Moody’s assessment of Polish debt at A2 level objective. However, according to Minister Paul Szałamacha, polemics requires negative forecast that in his analysis concluded the agency.
Paul Szałamacha noted that the government implements its strategy for the budget and there is no risk of an excessive increase in the deficit.
Szałamacha Minister said that the issue of tax-free amount is spread over the next few years, and in the first year of the rule of Law and Justice focuses on the implementation of the pro-family. The government is also working intensively on the reconstruction of own revenues of the Polish budget – said Paul Szałamacha. This is intended to combat tax avoidance. According to the minister, the risk, which is said Moody’s is not.
Paul Szałamacha also referred to the concerns of economists from Moody’s on foreign currency loans.
Szałamacha Minister said that the president Andrzej Duda consistently seeks to solve the problem loans in francs. However, it will not take any steps that might jeopardize the stability of the Polish banking system.
Previously, S & amp; P cut the long-term rating for the Polish debt
In mid-January. 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.
The 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.
Sarah Carlson, principal analyst at Moody’s in Poland about the pros and cons of our economy:
Source: TVN24 / x-news
Economists: maintaining the rating is a huge plus
Changing the Agency Moody’s rating outlook from stable to negative for the Polish did not surprise experts. They note, however, that maintaining the same level of rating “is a huge plus for Polish”.
– That was only the prospect of reduced credit rating Polish, not the rating, is a huge plus for Polish – said principal analyst Investment House Xelion Piotr Kuczynski.
How justified, because the agency Standard & amp; Poor’s valued Polish rating by two levels lower than Moody’s, Fitch and one level below. – The natural tendency of the agency, with the big three, was such that even a little bit closer to the opponents, rivals, and this has not been done – said Kuczynski. According to the analyst, “there is no doubt that the government will announce that it is a success.”
According to Kuczynski reduction by Moody’s rating outlook is right. – From the beginning I said I should do it, because of what awaits us in the next year, when it comes to state finances. This may be the big problem – he added.
“The reasons for lowering the prospects are bright”
With a colleague chief economist of BZ WBK Maciej Reluga said that “given the methodology of Moody’s, there is nothing surprising.” – I expected that it will be reduced prospect – he said.
In his opinion, the reasons for which it has been reduced prospect for Polish, are quite clear. – First, there is the risk of any adverse fiscal developments, increased spending and reduced fiscal consolidation in the future compared to previous plans. There is a risk of a negative impact on the banking sector of any proposal for the so-called. the problem francs, and something that is related to and part of the fiscal, but also with the potential GDP growth in the future, it is offering retirement age – explained Reluga.
– In all three aspects of the information is not too much. The new proposal francs does not, the law on retirement age is discussed, it is not known what will be the shape, the government wants to keep the deficit below 3 per cent., But it is not known whether he succeeds (…), so it is a huge area of uncertainty – he stressed.
The next assessment of Moody’s in September
According to Relugi important is that the next revision of Moody’s is already in September. – Today, Moody’s says outlook change to negative and I think that is quite clear on what we should see in the coming months to assess what will be the next step – said the economist.
In the opinion Relugi the perception of the Polish economy will be affected by those aspects that affect the evaluation of the Agency Moody’s. “If someone is investing in the Polish market, bonds and gold, it’s probably thinking about the same things over which reflects Moody’s – what will be the retirement age, what will be the budget and what will frankowiczami” – he explained.
“For investors, the worst is the uncertainty”
Analyst for the Polish David Dalton from the international weekly “The Economist” said that even before the decision of Moody’s zloty strengthened first, and then lost value. According to a specialist such big changes are not good.
Regardless of the latest quarterly GDP contraction Polish is related to EU funds and a decline in the construction industry and much of the government policy.
The analyst notes, however, that this policy is seen as uncertain, and uncertainty is the worst, because investors do not know what to make decisions.
According to David Dalton Polish economy is not in crisis, but it could cope much better. According to the specialist in this year’s development in our country will slow to 3.4 per cent .; next to 3.1 percent.
IAR / PAP, Celebrating
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