S&P Downgrades Poland
World Economy

S&P Downgrades Poland

Poland had its rating downgraded by one of the three major credit assessors for the first time as Standard & Poor’s warned that policies of the new government are imperiling the nation’s institutions.
The company cut Poland’s debt grade to BBB+, the third-lowest investment level, in the first rating move for the country since 2007, according to a statement issued on Friday. The country’s outlook is negative, meaning there’s at least a one-in-three chance of another cut over the next 24 months. Fitch Ratings affirmed its A- rating in a separate assessment, Bloomberg reported.
The Law & Justice party has tried to assert its influence over state institutions after winning an unprecedented parliamentary majority in an October election, limiting opposition oversight over secret services and increasing its influence over the constitutional court and a public broadcaster, moves that have sparked street protests in the European Union’s biggest eastern economy. The Polish Finance Ministry said in a statement Friday that the S&P decision is “incomprehensible.”
“The downgrade reflects our view that Poland’s system of institutional checks and balances has been eroded significantly as the independence and effectiveness of key institutions, such as the constitutional court and public broadcasting, is being weakened by various legislative measures initiated since the October 2015 election,” S&P said in its report.
The surprise decision comes two days after the European Commission took a first step to discipline Poland’s new ruling party for exerting greater sway over the state, fueling a debate about whether Eastern Europe is slipping back into its authoritarian past.
S&P’s move to lower Poland’s sovereign rating doesn’t reflect “economic and financial analysis,” the Polish Finance Ministry said in its e-mailed statement.
“This decision is contradictory to assessments presented by other rating agencies, the biggest international financial institutions and financial-market participants,” according to the ministry.
Fitch said Friday that it affirmed Poland’s credit rating with a stable outlook, reflecting the country’s “strong macro performance, resilient banking system and governance indicators,” according to the report.
S&P’s move sent the zloty to its biggest daily drop since 2011 on a closing basis. The Polish currency was trading at 4.48 versus the euro in New York, the weakest since January 2012. Among its peers in developing Europe, the zloty is the second-worst performer against the euro after the Russian ruble in the past three months. The country’s 2025 euro-denominated bonds slid the most on record.


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