Polish Zloty: Fiscal slippage and cautious NBP weigh – Commerzbank

Commerzbank’s Tatha Ghose highlights that recent Polish fiscal and monetary developments are negative for the Polish Zloty. A larger 2027 deficit target, President Nawrocki’s vetoes undermining revenue measures, and accelerating underlying inflation leave little sign of fiscal consolidation while the National Bank of Poland stays cautious rather than hawkish, increasing the Zloty’s risk premium versus other CE3 currencies.

Deficit and politics lift risk premium

"Recent Polish developments turned less favourable for both fiscal and monetary outlooks. The government has adopted a 2027 fiscal deficit ceiling of PLN 282.6bn (expanded from the PLN 271.7bn target for 2026), and implying 7.1% of GDP deficit (original target: 6.8%), which is not much improved at all from the 7.3% of 2025."

"These developments propel the escalation between president and government ahead of next year’s election and naturally impinge on the zloty’s risk premium."

"Moving on to monetary policy, July MPC minutes show that Poland’s National Bank (NBP) held rates because of uncertainties around 1) the Middle East, 2) fiscal policy, 3) ETS2 and 4) droughts."

"The Polish acceleration is proving sharper than in the other CE3 peers, and sharper than NBP and Adam Glapinski are willing to turn hawkish."

"Both sets of developments are negative for the zloty: fiscal policy and the government-president tussle for obvious risk-premium reasons, and monetary policy because NBP will at best stay cautious rather than genuinely hawkish."

"Finance Minister Andrzej Domanski argues that the outcome is only “slightly” worse as a result of adverse shocks such as fuel tax cuts, lack of VAT on SAFE payments and the Middle East shock – but, the broader point is simple: there is hardly any consolidation despite another year of relative macroeconomic calm."