Poland’s constitutional crisis credit negative, warns Moody's

By bne IntelliNews April 5, 2016

The ongoing constitutional crisis in Poland may hurt the investment climate and is credit negative, Moody’s Investors Service warned on April 4. The caution comes shortly before the rating agency's scheduled review of its rating on the sovereign on May 13.

Standard and Poor’s surprised as it offered Poland a 'political' downgrade to BBB+ from A- in mid-January, and moved its outlook to negative. The rating agency cited the Polish government’s recent moves to consolidate power via the constitutional court and state media as the leading causes.

S&P's peers both suggested around the same time that they could follow suit. Fitch, which rates Poland at A- with stable outlook, said the same day as the downgrade that evident relaxation of fiscal policy has shifted the “balance of risks to the negative side”.

Moody’s, which rates Poland at A2 with a stable outlook, warned on January 26 that the prospect of deteriorating fiscal indicators on the back of looser fiscal policy and relaxation of the country’s budget spending rule is "credit negative".

While bonds and the zloty have since recovered their poise somewhat, the crisis remains unresolved. That is undermining the country’s credibility with foreign investors, Moody’s said in a note on April 4.

"Poland is facing heightened political risk as a result of its constitutional crisis. These developments may impair Poland's attractiveness for foreign investors, a credit negative," the rating agencye said in a statement.

The analysts suggest investment flows thus far this year are a warning sign. "Net portfolio inflows have progressively declined in recent months and posted a negative reading at the beginning of 2016," they write in the note. "In January, Poland registered a net portfolio outflow of $3.1bn. The January 2016 outflow is the second largest reading in the last 10 years, ranking second only to the outflow registered in October 2008 after the Lehman collapse."

The note appears just the latest in a multi-pronged effort to get Law and Justice (PiS), the right wing party that took power in November, to back down. The government has effectively paralysed the Constitutional Tribunal (TK) since it pushed through a new law on the tribunal in December.

The constitutional row has raised alarm in Brussels and elsewhere. Warsaw has found itself the first ever EU member state subject to a European Commission probe into the state of the rule of law.

 

 

 

 

 

 

 

 

Related Articles

Hungary finally joins the negative yield club

Hungary finally joined the negative yield club on March 21 as Government Debt Management Agency AKK  accepted a bid of -0.01% at an auction of 3-month T-bills. Hungarian yields have been on ... more

S&P improves Russia's outlook to Positive

Standard & Poor's improved the outlook on Russia's sovereign ratings from Stable to Positive, while affirming the 'BB+/B' foreign currency rating and 'BBB-/A-3' local currency rating, the agency ... more

IMF delays new $1bn tranche to Ukraine due to Donbas blockade

Ukraine's main donor, the International Monetary Fund (IMF), has cancelled a board meeting scheduled for March 20 that was expected to see the release of a $1bn tranche to Ukraine, while demanding ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss