Policy Uncertainty and Fiscal Strains Weigh on Polish Zloty

Key Moments

Commerzbank Flags Negative Backdrop for PLN

Commerzbank’s Tatha Ghose views the current environment for the Polish zloty (PLN) as unfavorable. He points to a mix of temporary tax measures that distort inflation data and concerns about Poland’s fiscal trajectory, which together create an extended period of downside risk for the currency.

Fuel Tax Relief Distorts Inflation Picture

According to Ghose, the government’s temporary reduction of fuel taxes is artificially suppressing measured inflation and could be influencing monetary policy decisions at the National Bank of Poland (NBP).

“The government estimates that this could lower October CPI inflation by a full 1pp, potentially returning headline inflation to around 3% year-over-year (last reading 4%). One might imagine that falling inflation would be good for the zloty, but it is not. This is an artificially-created temporary fall, whereas NBP seemed to use such relief as an argument to delay rate hikes.”

He notes that this approach could lead investors to question the robustness of the policy framework, as it relies on short-lived tax relief rather than more durable disinflation dynamics.

Energy Prices and Policy Horizon

Ghose highlights that any benefit from lower fuel taxes is likely to be short-lived, given the interaction with global energy markets and the scheduled expiry of the measure.

“Fuel prices are forecast to rise again already beginning this week because the cap still incorporates global price moves – and world energy prices are not relenting. The tax relief is scheduled to expire on 31 December anyway, which could produce another inflation jump early next year. Glapinski is banking on relief to be extended, but this is not guaranteed and can hardly be the basis for prudent monetary policy.”

From a currency perspective, this mix of temporary relief and uncertain policy continuity adds another layer of volatility risk for the zloty.

Dovish MPC Signal Pressures Zloty

Market reaction to recent communications from the Monetary Policy Council (MPC) has been negative for PLN. Ghose observes that the perceived dovish tilt has already translated into weaker performance versus regional currencies.

“The dovish signal from MPC last week made the zloty depreciate immediately against peers such as the Hungarian forint; this slippage is now extending.”

This extending underperformance suggests that investors are marking down expectations for near-term tightening, which in turn reduces support for the currency.

Fitch’s Fiscal Warning Adds Rating and FX Risk

Beyond monetary policy, Ghose underscores that Poland’s fiscal outlook has drawn explicit concern from rating agency Fitch, which sees significant risks if the fiscal stance is not adjusted.

“Meanwhile, rating agency Fitch warned that failure to reduce the fiscal deficit, further pre-election easing or weaker growth could trigger a rating downgrade. Fitch forecasts deficits of 7.3% of GDP in 2026 and 7.1% in 2027, with debt reaching 73.4% by 2028. The FX risk from such an unsustainable fiscal situation and its resultant rating risk is self-explanatory.”

These projections, combined with the warning about potential rating action, reinforce the view that structural fiscal concerns are now an additional headwind for the zloty.

Key Fiscal and Rating Metrics Highlighted by Fitch

Combined Impact on PLN Outlook

Taken together, the temporary nature of the fuel tax cuts, the NBP’s apparent readiness to lean on this short-term relief, the recent dovish MPC signal, and Fitch’s warning about large and persistent fiscal deficits all contribute to a challenging backdrop for the Polish zloty. Ghose’s assessment suggests that, under these conditions, FX downside risks for PLN remain elevated.