Poland's solid fiscal policy credibility underpins A2 rating - Moody's
March 8, 2013
Poland's recent set of GDP data wipe out any fears of recession and contribute to the country's solid fiscal policy credibility and favorable market perception, which underpin the sovereign’s A2 rating and stable outlook, rating agency Moody's said in a report.
On 1 March, Poland’s Central Statistical Office (GUS) said that the economy grew by 1.1% in Q4 of 2012 compared with the same period the previous year, but activity continued to decelerate as GDP rose by 0.2% in quarter-on-quarter terms. Net exports remained the main engine of economic growth amid shrinking imports, while domestic demand continued shrinking for the third consecutive quarter, the agency said.
“We believe economic activity will further slow down in 1Q 2013 and bottom out by 2Q, reaching a soft landing in the current growth cycle before accelerating in the second half of the year. These results not only allay fears of a recession or a hard landing that could have threatened fiscal revenues and investor sentiment, but also contribute to Poland’s solid fiscal policy credibility and favorable market perception,” the agency said.
Despite the fact that private consumption contracted by 1% year-on-year, the first such drop since 1996, the agency believes that weak consumption dynamics through the end of the year will help curb external imbalances and household indebtedness as domestic savings rates increase.
The agency added that foreign and domestic investor sentiment are likely to benefit from the fact that country’s economy will avoid recession once again, as it did in 2009 when Poland was the only economy in the European Union to report positive growth.
“Recent retail sales and Purchasing Managers’ Index data suggest some improvement of consumer and business sentiment in the first few weeks of 2013. Nevertheless, we forecast that full-year output growth for 2013 will slow to around 1.5% from 2.0% in 2012,” the agency said in the report.
“Economic resilience and a fiscal balance sheet on the mend contribute to Poland’s solid fiscal policy credibility and favorable market perception – factors that underpin the sovereign’s A2 rating and stable outlook,” the agency said.