Fitch affirms Poland

Fitch Ratings said it affirmed the Republic of Poland's BBB+ foreign-currency issuer default rating with a positive outlook and the A local-currency issuer default rating, F2 short-term rating and A country ceiling with stable outlooks.

Fitch said the ratings are supported by Poland's relatively strong recent macroeconomic performance and prospects. GDP growth is expected to pick up to about 4.5% this year from 3.2% in 2005, inflation is subdued and the balance of payments sound, with the current account deficit narrowing to an estimated 1.6% of GDP in 2005 and expected to remain at around 2% to 2.5% this year and next. Net external debt declined to 46% of current external receipts at the end of 2005 from almost 60% in 2004. The agency predicted that much of this will continue to be financed by net inflows of foreign direct investments.

The introduction of public finance measures to contain the budget deficit is the key to an upgrade of Poland's foreign-currency rating, the agency said, but in the current political environment, progress on this front remains uncertain. The largest parliamentary party, the PiS, is reliant on two smaller, nationalist and populist parties for a working majority. One of these, Self-Defence, has demanded formal inclusion in the government for its continued support. Should the government's reliance on smaller, populist parties increase, there is a risk that the outlook for public finances could deteriorate, Fitch said.

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