Markets Steady After Poland's Election, But Fiscal and Political Risks Grow

Economists warn that president-elect Karol Nawrocki may rail against government-backed reforms to cut a fiscal deficit, and secure EU aid. Any such revocation could prompt credit-ratings agencies to downgrade the outlook of Poland's country rating, which would indicate significant economic risk.

Financial aid from the EU could also be at risk if the judiciary situation is not sorted out. Moody's has warned that a return to politics as usual ahead of the 2027 election could see higher government spending, threatening 2026 deficit-reduction targets.

Rates Take a Breather Over Budgetary Questions
The National Bank of Poland kept its interest rate unchanged in June, suggesting it was in no rush to raise amid persistent inflation pressures and unclear fiscal condtions. Another rate cut was unlikely before September or October, central bank head Adam Glapiński said, noting increasing wages and the imminent end of price caps for electricity as the main risks.

With no clear draft 2026 budget, the central bank is wary of further monetary policy changes. And economists now believe the next rate move will not come until more fiscal clarity appears.

Bank Windfall Tax Proposal Heats Up Senior Political Tensions
Political tensions following the election have sparked debate in the ruling coalition for additional fiscal measures, such as a proposed windfall tax on bank profits. The junior coalition partner, Polska 2050, is calling for the tax, and potential mortgage relief if costs are passed on to consumers.

Despite the record profits of €9.4 billion achieved by the banking sector last year, it already pays a lot in taxes in corporate taxes and from a bank levy. Nevertheless, bank shares have been drifting lower ever since the election, with investors worried by ad-hoc fiscal shifts and increasing unpredictability in the financial sector.

Minimum Wage Under Scrutiny As Discussion Heats Up
The ministry of finance is proposing a 3 minimum wage rise for 2026, in line with inflation projections, while the ministry of family and labour has recommended a more generous 7.6 rise. As unions call for more and employers urge restraint, the decision will now depend on the Social Dialogue Council, but if no agreement is reached by mid-July, the government will decide.

Poland Approves Bill to Solidify Defense Spending
There is a crossparty majority in parliament for a proposal to enshrine a 4% GDP defence spending floor in the constitution. If enacted, it would take effect with the 2026 budget and fundamentally transform long-term fiscal planning. But questions remain about how the 4 percent will be figured and whether off-budget spending can be applied toward the total.

Russia's Wealth Fund Drains Fast
Russia's National Wealth Fund, once a fiscal cushion, is being depleted at breakneck speed. It lost nearly $6 billion in May alone, and now has less than $36 billion in liquid assets. Moscow, meanwhile, may be left with little choice other than to take drastic steps unless it can find a different path on Ukraine, given lower revenues and high spending on the war.