Polish Election: Outcome Could Influence EU Transfers

DBRS Morningstar considers political influence over independent public institutions to be a potential constraint on the Republic of Poland's (A, Stable) ratings. The ruling Law and Justice (PiS) party has for years wrestled with the European Commission (EC), which considers the Polish government's influence over the judiciary as weakening the rule of law. Similarly, weaker independence of the state media and the central bank is a concern. PiS is once again in the pole position to win the parliamentary election on October 15, 2023, although polling suggests it will likely fall short of a majority. Whether PiS remains in office or hands back control to the main opposition party, the liberal-centrist Civic Coalition (KO), will likely depend on the preferences of potential junior coalition partners. In our view, the degree to which the next government exerts political influence over public institutions could ultimately have credit implications, particularly if the next government's relationship with the EC results in significantly lower EU funding.

• Another PiS led government in our view is unlikely to reduce political influence over public institutions or to drastically improve relations with the EC.
• A government led by the opposition would likely struggle to reverse eight years of PiS-era policies.
• The priorities pushed by the next government could have credit implications, especially if the outcome results in lower EU funding.

“DBRS Morningstar assumes Poland will receive its EU transfers, although this is not guaranteed,” said Jason Graffam, Vice President, Global Sovereign Ratings. “We would consider it problematic for Poland if its promised allotment of EU funding were significantly reduced. Successful receipt and absorption of EU transfers are key for Poland to increase its capital stock and strengthen the productive capacity of its economy.”