Commerzbank’s Tatha Ghose has highlighted that recent fiscal and monetary developments in Poland are exerting negative pressure on the Polish Zloty. The government has set a 2027 fiscal deficit ceiling at PLN 282.6 billion, an increase from the PLN 271.7 billion target for 2026, which implies a 7.1% of GDP deficit. This figure is only a marginal improvement from the 7.3% deficit projected for 2025 and is higher than the original 6.8% target for 2027, indicating limited fiscal consolidation despite a relatively stable macroeconomic environment [1].
Political tensions are also contributing to the Zloty’s risk premium. President Nawrocki’s vetoes have undermined revenue measures, escalating the conflict between the president and the government ahead of next year’s election. These political developments are seen as increasing the risk premium on the Zloty compared to other Central and Eastern European (CE3) currencies [1].
On the monetary policy front, the National Bank of Poland (NBP) has maintained interest rates, as reflected in the July MPC minutes, citing uncertainties related to the Middle East, fiscal policy, ETS2, and droughts. The NBP’s stance remains cautious rather than hawkish, even as underlying inflation in Poland accelerates more sharply than in other CE3 peers. This reluctance to adopt a more aggressive monetary policy is also viewed as negative for the Zloty [1].
Finance Minister Andrzej Domanski has argued that the fiscal outcome is only “slightly” worse due to adverse shocks such as fuel tax cuts, the lack of VAT on SAFE payments, and the Middle East shock. However, the broader assessment is that there is little sign of meaningful fiscal consolidation [1].
CONCLUSION
The combination of fiscal slippage, political tensions, and a cautious central bank stance is weighing heavily on the Polish Zloty. Market participants are likely to view these developments as increasing the currency’s risk premium relative to regional peers. Without significant fiscal consolidation or a shift in monetary policy, the Zloty may remain under pressure.