The agency, one of the world's three major credit rating agencies, also pointed to weakening fiscal policy effectiveness when it announced the decision on September 18.
"The downgrade of Poland's ratings to A3 reflects our expectations of a sustained deterioration in Poland's fiscal strength," Moody’s said in its announcement.
"Large fiscal deficits persist, leading to a material increase in public debt and, together with rising interest costs, weaken debt affordability metrics," the agency added.
It also warned that "fiscal policy effectiveness has weakened," citing a "limited willingness or ability on the part of the Polish authorities to rebuild fiscal buffers during favourable economic conditions."
Moody's said "political constraints, including the continued standoff between the government and the president," as well as the proximity of next year's parliamentary elections, "limit the scope for meaningful fiscal consolidation."
The downgrade was the first by any of the three major ratings agencies since 2016, when Standard & Poor's lowered Poland's rating from A- to BBB+. S&P restored the rating to A- two years later.
Poland's Finance Minister Andrzej Domański said Moody’s had previously assigned Poland the highest rating among the three major agencies. Following the downgrade, Poland's rating is now aligned with those assigned by Standard & Poor’s and Fitch, he said.
"We take this decision seriously, but calmly," Domański said. "The Polish economy is growing rapidly, and its fundamentals remain strong. We will consistently strengthen public finances, but this requires cooperation from all state institutions, including the president."
Moody's also changed Poland's outlook from negative to stable, saying it expected strong economic growth and government debt to stabilise in the coming years.
Michał Owczarek has this report.
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