Polish Zloty: Fiscal risks cap gains against Euro - Societe Generale
Societe Generale notes that the Polish Zloty strengthened while domestic bonds sold off as August inflation and second-quarter Gross Domestic Product (GDP) exceeded expectations and the government presented its 2027 budget.
Societe Generale reported that the Polish Zloty rose as domestic bonds declined amid unexpectedly strong August inflation and GDP growth, along with a forthcoming 2027 budget. The draft budget saw a projected fiscal deficit of 7.1% of GDP, unchanged from the anticipated 2026 rate, and a tax reform that seeks to shift the burden toward corporations.
These fiscal risks, coupled with the anticipation of a downgrade and higher borrowing costs from ratings agencies, have impacted the EUR/PLN exchange rate, which slipped below 4.33. Polish headline inflation surged to a 14-month high of 3.4% from July's 3.0%, while the final Q2 GDP was revised upward to 1.0% quarter-over-quarter (3.9% year-over-year).
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