Miasto Stoleczne Warszawa

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The outlook on Warsaw’s rating changes

published: thursday, 2. june 2016 - 13:32, Magdalena Łań
Warsaw. Fot. PZ Studio fot. Warsaw. Fot. PZ Studio

Moody’s has lowered the outlook on Poland’s credit rating from stable to negative (A2 on the international rating scale). This automatically leads to lowering the outlooks for national entities that share the country’s rating, including Warsaw.


The current change in Warsaw’s outlook from stable to negative has never happened before since the city started being assigned such ratings.

This change in outlook from stable to negative increases the risk of Poland’s, and thus Warsaw’s, decline in ratings. This might lead to relatively higher costs of external financing. We want to incur capital expenditures of over 10.5 billion zloty to support development, including the Metro, roads, schools and cultural institutions, by 2020,” said Hanna Gronkiewicz-Waltz, Mayor of Warsaw.

The first Moody’s rating was assigned to Warsaw on 20 December 2007 and it was A2 with a stable outlook. That was the highest possible rating for a Polish city, as the country’s rating sets the upper limit for the ratings of its entities (sovereign ceiling). From that time Warsaw’s rating and stable outlook have remained unchanged.

With the recent lowering of the outlook on Poland’s international rating, which is also affecting Warsaw, it should be stressed that the city has remained financially stable. The change in outlook was caused by external factors beyond the city’s control.

Consequences for Warsaw
The change in the country’s outlook from stable to negative increases the risk of lower rankings in the future. Taking into account the relationship between the rating and the margin added to external financing, it can be assumed that should the country’s rating be lowered in the future, then due to the resulting lowering of Warsaw’s rating, the issuance of new bonds or borrowing would entail higher payments to lenders/investors to cover the risk and relatively higher costs of servicing. For debt financing using bonds, Warsaw will specify its interest rates assuming a margin exceeding the benchmark, i.e. Treasury bonds. The costs of financing might increase along with the rise in the profitability of Treasury bonds. Each drop in the rating by 1 level usually