Global ratings agency Moody's on Saturday lifted its outlook for Poland to stable from negative, a decision that reflected "reduced risks of loose fiscal policy" by its populist rightwing government. Moody's left unchanged its A2 investment grade for the EU's largest eastern economy that has yet to join the eurozone. The change reverses the agency's May 2016 downgrade to negative, its first in over a decade.

The agency said the improved outlook was due to reduced fiscal risks, with the deficit in line with "the 3.0 percent of GDP limit and public debt stabilising at or near the current level of 55 percent of GDP." It added that "uncertainties stemming from government policies will remain contained, which in turn will ease the downside risks to the business climate and investment flows."

But critics still warn that generous spending by the Law and Justice (PiS) government - including a popular new universal child allowance - will bloat public finances in the country of 38 million. Development and Finance Minister Mateusz Morawiecki called Moody's move "rational" after the risks it perceived had "not materialised". The agency also said it would keep its foreign debt grade at A2, reflecting Poland's "economic resilience as... a large, diversified economy that has shown robust real GDP growth irrespective of external headwinds."

Copyright Agence France-Presse, 2017