Poland’s recent presidential election result risks deepening political instability and weakening the government’s ability to implement fiscal consolidation and economic reform, according to a note from Fitch Ratings released on July 17.

The outcome, which saw conservative opposition-backed candidate Karol Nawrocki narrowly defeat the government’s nominee, is expected to prolong institutional tensions within the country.

“The outcome of presidential elections in Poland (A-/Stable) could exacerbate political uncertainty and institutional clashes and continue to challenge the government’s capacity to implement fiscal consolidation and economic reforms,” said Milan Trajkovic, an analyst with Fitch Ratings.

Nawrocki, affiliated with the opposition Law and Justice (PiS) party, defeated Warsaw mayor and government-backed candidate Rafal Trzaskowski in the second round of voting in May. His presidency is expected to act as a political counterweight to Prime Minister Donald Tusk’s coalition government, which has already faced pushback from PiS-appointed officials since returning to office in December 2023.

“The presidency is likely to continue challenging the coalition by vetoing or delaying legislation,” said Trajkovic, highlighting the likelihood of continued gridlock between the executive and legislative branches.

Despite surviving a vote of confidence on June 11, the governing coalition faces renewed pressure on cohesion and policy delivery. “Political considerations are also likely to reduce the room to implement unpopular measures, including those supporting fiscal consolidation, ahead of parliamentary elections due by October 2027,” Trajkovic added.

Poland’s public finances have deteriorated notably, with the general government deficit widening to 6.6% of GDP in 2024, up from 1.7% in 2021 and overshooting the government’s 5.7% target. The rise was driven by increased defence expenditure, higher debt servicing costs and rigid spending on public wages and social transfers.

Fitch sees limited progress ahead. “The government’s predominantly backloaded consolidation plan relies on smaller-scale initiatives. Without additional measures, reducing the deficit below 3% and stabilising debt at levels comparable to Poland’s peers will be difficult,” Trajkovic warned.

Fitch recently revised its 2025 deficit forecast upward to 6.6% of GDP, from 5.9% in March, citing “the higher 2024 deficit, increased political challenges and an absence of additional fiscal measures.” The deficit is projected to decline only gradually to around 4% by 2028, with limited consolidation expected in 2027 due to election pressures. Public debt is forecast to reach 64% of GDP by 2027, up from 55% at end-2024, widening its gap relative to the ‘A’ rating median.

“A key question is the government’s policy response if fiscal deficits continue to miss targets, particularly amid the trade war, US policy uncertainty, the impact of fiscal measures on domestic demand and the difficult political environment,” Trajkovic said.