Moody`s assigns Prime-1 short-term rating to Government of Poland
Baku, March 13 (AZERTAC). Moody`s Investors Service has today assigned a Prime-1 short-term debt rating to the government of Poland. The government`s existing long-term debt rating is A2 and carries a stable outlook.
The newly assigned Prime-1 rating for Poland`s short-term debt is driven by Poland`s improved liquidity position that has seen cash reserves increase steadily since 2008 while the stock of short-term outstanding debt has declined markedly to under 1% of GDP by the end of 2011 from around 4% in 2008. Both the short-term rating and the existing A2 government bond rating reflect a relatively large economy and balanced growth, which have provided an important degree of stability throughout the global financial crisis. Even though Poland`s GDP per capita is lower than that of other Central European countries, the country`s economic growth has strongly outperformed peers since 2008 (Poland was the only country in the EU to have positive GDP growth in 2009). This performance has allowed it to close most of the gap that emerged during the 2004-07 boom, when Poland grew more slowly than the regional average. Moody`s expects that Poland`s GDP growth will remain positive, even as the risk of recession among major western European countries intensifies.
Moody`s notes that fiscal consolidation remains a key theme for Poland in 2012-13. Macroeconomic policymaking has contributed to a reduction in the volatility of real GDP growth over the past decade but now faces significant challenges as the euro area enters a crucial stage in the ongoing crisis. In particular, fiscal policy will need to balance the conflicting objectives of supporting the economy and meeting deficit reduction targets through 2013.
Poland`s government financial strength is supported by the financial system`s ability to provide financing to the sovereign, thereby increasing its funding flexibility in the domestic market. Legal limits are in place to keep the debt/GDP ratio below the Maastricht criterion of 60%, although government debt ratios remain above `A` category medians.
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