Fitch Ratings affirmed Tuesday Poland's long-term foreign and local currency Issuer Default Rating at 'A minus' and 'A', respectively, giving a stable outlook. The firm also affirmed the short-term foreign currency IDR at 'F2' and the country ceiling at 'AA minus'.
Fitch forecasts the Polish economy to slow considerably in 2009, but expects the downturn to be less severe than in most EU and emerging European countries. The firm expects the Polish economic growth to be zero in the current year compared to 4.9% in 2008.
Fitch said the lower economic forecast would have a negative effect on the budget. The firm expects the general government deficit to widen to 4.6% of GDP this year from 3.9% last year. At the same time, Fitch estimates the general government debt to rise to 51% of GDP in 2009 from 47% in 2008, and stabilize around this level in 2010.
Fitch noted that in order for Poland to be able to officially adopt the euro currency in 2012 or 2013, the government deficit would have to improve, beginning from 2010. But, with the weak growth outlook and an election due in 2010, it would be difficult for the government to bring the deficit back below the 3% of GDP Maastricht threshold in 2010, the firm noted. Fitch therefore views the most likely data for the euro adoption as 2013.
Meanwhile, Poland's ratings were supported by its track record of macroeconomic stability, underpinned by its diverse economy, credible monetary and exchange rate regime, and relatively strong banking sector. The country's political and social stability is supported by membership of the EU, Fitch said.
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