S&P announced its decision on Friday evening, November 6, after financial markets had closed. The agency affirmed Poland’s long-term foreign-currency credit rating at A-, but changed its outlook from stable to negative. At the same time, it downgraded Poland’s local-currency rating from A to A-, bringing it in line with the foreign-currency rating. The short-term local-currency rating was also cut from A-1 to A-2.
This was the final scheduled review of Poland’s creditworthiness in 2026 by one of the world’s three major credit rating agencies. S&P has now joined Fitch, which had already assigned Poland a negative outlook, and Moody’s, which downgraded Poland’s rating in September from A2 to A3.
A negative outlook does not automatically mean another downgrade is coming. It does, however, signal that the agency sees a growing risk of one if Poland fails to improve its public finances.
Budget Deficit and Public Debt Are Becoming Major Problems
S&P’s main concerns center on the state of Poland’s public finances.
The agency forecasts that the general government deficit will reach 7.1% of GDP in both 2026 and 2027. It expects the figure to fall to 6.2% in 2028 and 5.3% in 2029. All of these projections are well above the European Union’s fiscal benchmark of 3% of GDP.
S&P says the problem is structural. Major spending pressures include defense outlays, estimated at 4-5% of GDP, rising social benefits, and higher public-sector wages.
The debt projections are even more troubling. Net general government debt is expected to rise from approximately 53% of GDP in 2025 to more than 70% by 2029. That would represent an increase of over 20 percentage points in just five years.
S&P ranks this pace of fiscal deterioration among the most severe increases in government debt it has observed worldwide.
S&P Points to the Political Conflict Between the Government and the President
The agency also identifies Poland’s political climate as a factor undermining fiscal policy. S&P points to deep political polarization and the difficulties facing Donald Tusk’s government in passing legislation needed to rein in spending and raise taxes. It also cites tensions surrounding the Constitutional Tribunal and the institutional problems associated with the dispute.
The parliamentary elections scheduled for 2027 are another concern. In S&P’s assessment, the chances of implementing serious fiscal consolidation before the election are limited. Political competition could make it even harder to push through unpopular decisions on public spending.
The agency warns that if current trends continue, Poland could be forced into sharp spending cuts in 2029-2030. Another possibility is that financial markets will react sooner, demanding higher interest rates to lend money to the Polish government. Either scenario could hurt economic growth.
The Economy Is Growing, but the Debt Still Has to Be Paid
S&P is not questioning the resilience of the Polish economy. It forecasts GDP growth of around 3.6% in 2026 and an average of approximately 3% annually between 2027 and 2029. Strong domestic demand, exports, investment, and funding from the European Union remain important strengths.
The problem is that economic growth alone cannot solve an excessive budget deficit. As public debt rises, so does the cost of servicing it. S&P estimates that interest payments will consume an average of around 8% of general government revenue between 2026 and 2029.
That is money the government will not be able to spend on other priorities.
Poland Now Has the Same Rating as Malaysia, but Ranks Below Andorra
Poland and Malaysia currently share the same S&P long-term foreign-currency credit rating: A-. There is, however, an important difference. Malaysia has a stable outlook, while Poland’s is negative, reflecting concerns about its rising debt and budget deficit.
Andorra, which until recently also held an A- rating, has just been upgraded by S&P to A, with a stable outlook. The upgrade reflects stronger financial stability mechanisms, including access to European Central Bank liquidity, as well as solid fiscal performance.
Andorra is recovering from earlier economic difficulties and structural weaknesses in its banking sector. The country has recorded strong economic growth, budget surpluses, and relatively low public debt.
The comparison is an uncomfortable one for Warsaw: a country with a much smaller economy and a population of fewer than 100,000 now holds a higher S&P rating than Poland.
Finance Ministry: The Economy Is Resilient. But for How Long?
Finance Minister Andrzej Domański said he had “taken note” of the agency’s decision, stressing the resilience of the Polish economy and its projected growth. The government has also blamed presidential vetoes for blocking some of its legislative plans.
S&P has left the door open for Poland to regain a stable outlook. But that would require a lasting reduction in the budget deficit and a gradual decline in public debt without causing serious damage to economic growth.
Otherwise, the next decision may concern the credit rating itself, not just its outlook.
Poland is entering a period in which the cost of financing years of government spending is increasingly limiting the country’s economic policy options. This is no longer just a warning from domestic economists. All three major international credit rating agencies are now sending a similar message.
