Poland could see EU fund delays says S&P in CEE report

Poland could see delays to EU funding, and a wider fiscal deficit, S&P has written in a report on major risks to CEE sovereigns.

A dispute over the rule of law has led to the European Commission (EC) denying Poland access to an EU post-pandemic recovery fund. The funding, which will be channelled into the National Recovery Plan (KPO), could provide a welcome boost to a Polish economy battered by high inflation.

"Hungary and Poland are particularly exposed to risks of delays to some EU funds, in our view," S&P analysts wrote. "Poland could see the first disbursement of the RRF (KPO – PAP) funds postponed until late this year or even 2024 due to the EC's unresolved concerns over the Polish judicial reforms.

"Our baseline is that the two countries and EU authorities will likely find a compromise, unlocking the funds, given the compelling economic and geopolitical reasons for doing so," they added.

On the fiscal front, Poland’s budget deficit will widen owing to an increase in defence spending.

"We expect Poland to run a fiscal deficit of close to 6 percent of GDP in 2023, the highest in over a decade excluding during the pandemic in 2020," the agency said.