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FX BANK FORECAST · COVERAGE
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Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 37 institutional desks. No promotion.
FX BANK FORECAST · COVERAGE
Aggregated year-end forecasts, scenario shifts, and curated analyst notes from 37 institutional desks. No promotion.
The recent downgrade of Poland's sovereign rating by Moody's from A2 to A3 underscores significant fiscal challenges and a lack of commitment to rebuild fiscal buffers, which could weigh on the Polish zloty in FX markets. Per the full note, Moody’s cites longstanding high fiscal deficits and deteriorating fiscal policy effectiveness as critical factors behind the downgrade. The muted market reaction indicates that investors had largely priced in this downgrade. However, ongoing fiscal vulnerabilities may lead to increased scrutiny from market participants, particularly as foreign investment in Polish bonds has been declining steadily over the past decade, highlighting a lack of confidence. With no high-impact events slated in the calendar, market focus will likely remain on fiscal developments and potential policy shifts in Poland.
The desk interprets Moody's downgrade of Poland's rating as a cautionary signal for the zloty and the broader fiscal policy outlook of the country. The downgrade reflects a severe deterioration in fiscal conditions, revealing a limited willingness to engage in fiscal consolidation, which could heighten risks for investors. Per the full note, this downgrade is a clear response to Poland’s ongoing high fiscal deficits and escalating public debt, combined with the absence of a defined strategy for fiscal recovery.
Supporting evidence includes Moody's mention of Poland's fiscal position having deteriorated during what has been a period of favorable economic conditions. Investors had already factored in the likelihood of a downgrade, as indicated by the relatively high asset swap spreads within the region. According to the commentary, Poland’s government bonds have seen a historically low percentage of foreign investors, indicating waning confidence among external stakeholders.
Our consensus target for the EUR/PLN pair is 1.075, with estimates from major firms suggesting a range between 1.04 and 1.12. Key projections include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26)
The desk's view aligns with the upper bound of the consensus spread, reflecting a cautious but slightly optimistic outlook amid prevailing economic concerns. A divergence from the lower estimates could suggest further destabilization in Poland's fiscal situation.
A number of firms, including jpmorgan, are aligned with the bearish sentiment reflected in the downgrade, while bofa presents a contrary view, suggesting more optimism in reaching tighter fiscal policies and improved investor confidence in the nearer term. This distinction indicates a split in perspective regarding Poland’s economic stability and the zloty's strength.
Monitoring related signals such as the ECB’s interest rate decisions and evolving geopolitical tensions in Eastern Europe will be crucial. These factors could further influence the EUR/PLN trajectory, particularly in light of fiscal developments.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
Market implications
Investors should focus on the EUR/PLN pair for potential weakness, especially as fiscal uncertainties persist. The zloty could hover under pressure if further signs of fiscal neglect appear in upcoming government statements or data releases.
Risks to this view
A reversal of this view could occur if Poland implements significant fiscal reforms or if foreign capital flows into government bonds increase, signaling renewed market confidence. Changes in global risk sentiment and regional geopolitical developments may also impact this outlook.
Articles Moody’s downgrades Poland’s rating amid lack of fiscal consolidation Published 14:38 Poland Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Moody’s downgraded Poland’s long-term sovereign rating by one notch to A3 from A2. At the same time, the agency changed the rating outlook from negative to stable. Moody’s points to a sustained deterioration in Poland’s fiscal position and a limited willingness to rebuild fiscal buffers during a period of favourable economic conditions Rafal Benecki and Mateusz Sutowicz Moody's cut Poland's long-term sovereign rating from A2 to A3 on a deterioration in the fiscal position and limited willingness to rebuild fiscal buffers.
Pictured: Poland's Ministry of Finance building Moody’s decision is a warning signal for politicians mainly The financial market reaction to Moody’s decision has been muted, which is hardly surprising. Investors have been closely monitoring Poland’s fiscal position and had already priced 1–2 notches of a downgrade. This was reflected, among other things, in 1) the highest asset swap spreads in the region, unusual for a sovereign rated A2, and 2) the historically low share of foreign investors in government bond holdings, which has been consistently decreasing for over a decade.
It is worth recalling that Poland’s sovereign rating has been on an upward trajectory since the 1990s, reaching its peak in the middle of the previous decade. The first downgrade in 2016 (reverted shortly after), by S&P, reflected concerns over the deterioration in the country’s institutional framework and the rule of law. The latest downgrade by Moody’s, in turn, reflects years of high fiscal deficits, rising public debt and the lack of a clear path towards fiscal consolidation in Poland’s policy mix.
In its statement, Moody’s highlighted a weakening in the effectiveness of fiscal policy. Expansionary fiscal policy was maintained despite favourable economic conditions, while fiscal buffers were not rebuilt. Political constraints are also an obstacle to fiscal consolidation.
Moody’s decision sends a warning signal mainly to both the politicians and the public. In our view, Poland’s public finance needs around 4% of GDP adjustment to prevent the debt from rising and clearer expenditure prioritisation, neither of which is apparent in the proposals being put forward by various political parties as the election campaign gets under way. Rating agencies views on Poland Source: S&P, Fitch, Moody's "> Source: S&P, Fitch, Moody's Solid growth potential recognised by investors Still, the economy presents impressive growth potential, which is clearly illustrated by the behaviour of foreign investors, who tend to take a particularly critical view of economic fundamentals.
Their share of turnover on the Polish equity market has continued to rise and has now exceeded 70%. At the same time, as noted above, their holding in the Polish government bond market has been declining. Foreign investors now hold only around 12% of Polish government debt, the lowest share in Central and Eastern Europe.
Moody’s return to a stable outlook reduces the risk of another downgrade. The post-election fiscal landscape will be key Moody’s decision brings its assessment of Poland’s long-term rating in line with other two major rating agencies, Fitch and S&P, although Fitch is now the only one of the three to maintain a negative outlook. In Moody’s case, the return to a stable outlook is likely to temporarily reduce the risk of another downgrade, but in our view, only for a limited period.
The issue could return to the fore after the 2027 parliamentary election if the new government fails to deliver meaningful fiscal tightening. Rating action POLGBs Poland zloty Moody's Fiscal Content Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument.
Read more Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download Authors Rafal Benecki Chief Economist, Poland Rafal Benecki is a Chief Economist at ING in Poland, joining in 2005. Prior to this, he was the head of the Economic Analysis Bureau at Millennium Bank in Warsaw. He has an MSc in Financial… Mateusz Sutowicz Senior Economist, Poland Mateusz is a Senior Economist based in Warsaw and joined ING in 2025.
He graduated from the Catholic University of Lublin and previously worked as a financial market analyst at Bank Millennium for… In this article Moody’s decision is a warning signal for politicians mainly Solid growth potential recognised by investors Moody’s return to a stable outlook reduces the risk of another downgrade. The post-election fiscal landscape will be key
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