Growth in Poland “is still strong” despite recent signs of nervousness among international investors, Sarah Carlson, senior vice president for sovereign risk at Moody’s Investors Service, told a panel debate organized by New Sparta Events in London on June 9.
Speaking at the headquarters of the European Bank for Reconstruction and Development (EBRD), Carlson said that Poland “still has a very strong rating”, and asked guests to put its recent sovereign downgrade “into perspective”. “The gap between Poland and the next lowest-rated country in the region, Bulgaria, is large, and growth is still strong,” she said.
Carlson noted two key elements that led to the downgrade: the “negative fiscal outlook” under the populist Law and Justice (PiS) party-led government and “pressures on the investment climate”.
Policies such as PiS’ proposed ‘500 programme’, which guarantees child benefits of PLN500 to every second and subsequent child in Poland, combined with programmes that are funded by one-off revenues, are creating a “negative fiscal outlook”, according to Carlson.
The pressures she cited relate to policy unpredictability and political tension between the executive and judiciary branches of government.
Also sitting on the panel was Nomura International’s head of investment banking in Central and Eastern Europe, CIS and Turkey, John-Paul Warszewski, who warned that “the government should be more mindful of its reputation abroad”.
Warszewski described the current PiS administration as “too inward looking”, adding that it “needs to focus on international communications” – a statement that mirrors growing concerns that the government is taking an increasingly isolationist approach to running the country.
Despite the potential forced conversion of Swiss franc-denominated debt into zloty, which could cost Polish lenders up to €9.2bn, the country’s banking sector as a whole is thriving. The growth in consumer borrowing over the last five years has outstripped real GDP growth, over a period that has seen a net appreciation of the zloty.
While the banking sector in Poland is growing healthily, another panelist, Piotr Gałązka, who is director at the Polish Bank Association, highlighted the fact that the sector is at a different stage of development to those of its Western European counterparts. “We should avoid a one-size-fits-all approach to regulation at the European Union level,” he explained. “There is a need to consider proportionality between national banking sectors when thinking in these terms.”
Representing the EBRD on the panel was the bank’s director for Poland, Grzegorz Zielinski, who looked at the bigger picture when assessing Poland’s growth prospects. “The economic performance has been impressive and the growth outlook remains strong. Poland remains one of our core countries, behind only Turkey, Ukraine and Kazakhstan in terms of the value of EBRD's new commitments,” Zielinski said.
The EBRD’s first ever field office was in Poland’s capital Warsaw, and the bank has completed over 300 projects in Poland to date, with a current portfolio of over €3bn worth of projects.