This report does not constitute a rating action.
S&P Global Ratings believes the recently ended presidential election campaign in Poland highlights the challenges that the economically resilient country might face in policy implementation.
Karol Nawrocki narrowly defeated Rafal Trzaskowski 51%-49% in the presidential election runoff held June 1. Nawrocki will succeed current President Andrzej Duda, whose term expires in August.
Nawrocki's victory means Prime Minister Donald Tusk’s centrist government will govern alongside a president who could oppose most pro-EU policies. Nawrocki is aligned with the Law and Justice party, the main rival of Tusk’s Civic Platform party.
Frequently Asked Questions
What are the main challenges for Poland’s government after the presidential election?
The results suggest that the country's complex institutional backdrop from the last year and a half will remain in place.
The campaign as a whole underlines our view that the opposing sides in Polish politics remain highly adversarial, and we think that could make policymaking more unpredictable. We also think the implementation of parts of the government’s agenda will continue to prove challenging, not least because of the president's veto powers.
For example, it will likely be difficult to roll back some of the contentious reforms by the previous Law and Justice-led government--particularly reforms affecting the judiciary--and those efforts might encounter obstacles at the constitutional court.
At the same time, the Polish economy’s remarkable resilience to shocks continues to underpin our ratings. Over the last three decades, the economy's performance has been remarkable, with real GDP increasing threefold despite a slight decline in population. During that period, Poland’s external services position shifted from a balanced position to a surplus of almost 5% of GDP, with a balanced overall current account and net external debt to GDP below zero.
This resilience reflects Poland’s diversified economy, its flexible labor and product markets, its educated workforce, and its access to ample non-debt-creating external funding, including EU transfers. Nevertheless, the country's fiscal imbalances have been growing in recent years, and the protracted political gridlock, in our view, suggests that the probability of fiscal reforms is low.
How do we view Poland’s fiscal path over the next two to three years?
The rapid increase in government debt that we expect through 2028 highlights the country's rising fiscal risks.
We forecast that net general government debt (as a percentage of GDP) will rise by almost 10 percentage points between 2024 and 2028, with substantial military investment as a key driver (see chart).
Also, as the 2027 parliamentary elections draw closer, the appetite for more fiscal restraint might be contained. Still, we anticipate that the government could announce some consolidation measures in coming months. That, with help from cyclical improvements, leads us to project a decline in the general government deficit as a percentage of GDP--to 5.1% in 2026 and 3.9% by 2028.
Our deficit projection is higher than the government's for 2026-2028, since we think substantial measures would need to be defined for the government to reach its medium-term targets. We also project lower GDP growth than what the government sees in its fiscal planning.
We think the activation of the “national escape clause” under EU fiscal rules gives Poland some additional flexibility. Our projections already factor this in, however, and they indicate that the deficit likely won't fall below 3% of GDP by 2028.
We think market and investor sentiment might ultimately play at least an equally important role as the EU's Excessive Deficit Procedure in eventually encouraging fiscal consolidation in Poland.
What are our expectations for government funding, given Poland's wide fiscal deficits?
The government has already covered two-thirds of this year's financing needs, helped by significant prefinancing last year. And underpinning the government's funding prospects are Poland's highly liquid domestic financial system, pension funds, insurance companies' rising investment in government debt, and the existing cash buffer of about 4% of GDP at the Polish treasury.
Still, the cost of government funding has increased, with interest payments of 6% of revenue, on average, in 2025-2028. Also, we think government bond yields could experience bouts of volatility, depending on domestic and global interest-rate developments, exchange rate trends, and investor sentiment.
What are our expectations for inflation in Poland and for monetary policy?
We expect inflation to average 3.9% in 2025, and we think it'll cool further over the next three years.
The inflation rate will, in part, depend on the regulation of energy prices later this year. Political discussions also favor limiting energy price increases--which would dampen inflation.
Consumer Price Index (CPI) inflation was 4.3% in April 2025, above the National Bank of Poland's medium-term target of 1.5%-3.5%. Inflation projections for 2025 and recent inflation figures are now lower than previous forecasts, not least because the basket of products and services used to calculate inflation has been revised.
We forecast a year-end policy rate of 4.75%, with the potential for an even lower rate, taking into account the central bank's May rate cut. We expect year-end rates of 3.5% in 2026 and 3% thereafter.
Lower inflation spurred the central bank to cut interest rates by 50 basis points in May. Slowing wage growth and mixed economic data, which could reflect heightened global uncertainty, also fed into the central bank's May decision.
What impact will the election have on Poland's banking sector?
There aren't that many direct implications for Polish banks. They continue to benefit from strong underlying profitability, driven by basic banking services. We expect Poland’s GDP growth to support banks over the next year.
Polish banks have recently attracted a lot of investor interest, including investment into the first issuance of additional Tier 1 bonds by mBank S.A.
Our current Banking Industry Country Risk Assessment for Polish banks reflects comparably higher government involvement with regard to ownership and legislation impacting banks’ profitability and the regulatory framework. We will monitor how regulatory changes could affect bank operations, profitability, and funding strength.
Related Research
- Poland, May 12, 2025
| Primary Contacts: | Ludwig Heinz, Frankfurt 49-693-399-9246; ludwig.heinz@spglobal.com |
| Karen Vartapetov, PhD, Frankfurt 49-693-399-9225; karen.vartapetov@spglobal.com | |
| Secondary Contacts: | Christian Esters, CFA, Frankfurt 49-693-399-9262; christian.esters@spglobal.com |
| Heiko Verhaag, CFA, FRM, Frankfurt 49-69-33999-215; heiko.verhaag@spglobal.com | |
| Analytical Group Contact: | Sovereign and IPF EMEA, ; SOVIPF@spglobal.com |
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