PiS election victory points to risks to competitiveness

"We view the PiS’ economic policy and continuation of current changes in the judicial system as credit negative," Moody's commented. The analysts added that they forecast a temporary narrowing of the 2020 fiscal deficit of the general government to 0.6 percent of GDP because of sizable one-off measures amounting to about 1 percent of GDP.

Apart from fiscal implications, Moody's expect the PiS's envisaged policies to affect adversely Poland’s competitiveness. The minimum wage increase announced in the election campaign would almost double the minimum wage to PLN 4000 (€894 or $1099) per month in 2023 from PLN 2250 (€523 or $586) per month in 2019 and would probably push wage growth along the whole wage distribution.

"This would pose a risk to medium-term competitiveness of the Polish economy, drive up inflation and could eventually raise structural unemployment," Moody's stressed.

In addition to fiscal and macroeconomic challenges, a continuation of government policies points towards more pronounced state interventionism, which would weigh on Poland's institutional strength. In this context, the changes in the judicial system have already led to an ongoing conflict between Poland and the EU. The European Commission's main concern is that the changes' cumulative effect limit the judiciary's independence, infringing on the separation of powers. According to the European Commission, the changes in the judicial system allow the executive and legislative authorities to interfere throughout the entire structure of the justice system.

(WBJ)