Moody's Cuts Poland's Credit Rating Amid Surging Fiscal Deficit
Poland's credit rating was downgraded to its lowest level since 2002 as the government's budget deficit reached 7.3% of GDP in 2025, defying EU deficit-reduction targets. The rating agency cited unsustainable spending on defence and social programmes.
On September 19, Moody's downgraded Poland's credit rating, reflecting deepening fiscal pressures that threaten the country's macroeconomic stability. The government's budget deficit ballooned to 7.3% of GDP in 2025, the second-highest in the European Union, despite being placed under the EU's excessive deficit procedure in 2024.
The drafted 2027 budget projects a deficit of 7.1%, nearly double the 3.7% figure the government had previously committed to reach by that year. Public debt has risen rapidly, exceeding 60% of GDP in the first quarter of 2026 — the first time on record and above EU legal limits.
The Spending Squeeze
- Prime Minister Donald Tusk's government continues prioritizing defence spending (set to reach nearly 5% of GDP, among NATO's highest) and social programmes, including PiS-era increases to child benefits and pensions
- However, the ability to introduce budget-balancing measures has been hindered by President Karol Nawrocki's record number of bill vetoes, including proposed tax increases on alcohol and sweet drinks
For foreigners holding Polish property or savings accounts, rising government debt and lower credit ratings may translate to higher borrowing costs for Polish banks, which could affect mortgage rates and deposit interest. Expats with long-term residency should monitor how fiscal pressures affect public service quality and whether future austerity measures impact living costs.
Sources
Independent app, not a government. General information, not advice. The official source:
