Nawrocki's presidential win may hinder Poland's fiscal consolidation
Karol Nawrocki's win in Poland's presidential election will prolong institutional gridlock, as the ruling coalition may increasingly rely on fiscal measures to uphold support, potentially delaying fiscal consolidation in 2026, according to Moody's rating agency.
In Poland, the president has the power to veto legislation. The outgoing president, Andrzej Duda, a strong ally of the main opposition socially-conservative Law and Justice (PiS) party, has often used his blocking powers to prevent the incumbent centrist Civic Coalition (KO)-led government from delivering on many key campaign promises.
With Nawrocki, also allied with PiS, Poland will likely face a continuing period of institutional stalemate, Moody's wrote in a report sent to PAP on Tuesday.
A presidential veto can only be overridden by a three-fifths majority in parliament, which the current government lacks. This potentially allows the president to block work on laws that are not supported by PiS, the agency added.
"Nawrocki's victory means the existing stand-off between government and president is set to continue, making it difficult for the KO-led government to govern effectively and to implement judicial reforms," the report read.
This, in turn, could stall key reforms tied to Poland's National Recovery Plan KPO and complicate access to EU funds, according to Moody's.
Without legislative agreement, the ruling coalition might increasingly use fiscal spending to secure public support, the agency added.
"This comes alongside a significant uptick in defence spending and increasing spending pressures on health and social programmes. As a result, the Ministry of Finance's planned fiscal tightening planned for 2026 could be delayed," the report read.
Moody’s currently rates Poland's credit at 'A2' with a stable outlook, the highest among major agencies, in contrast to Fitch's and S&P's 'A-' ratings. (PAP)
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