The zloty has risen by 2.4% against the dollar since PiS were swept from power in Warsaw last week, along with a rally in various other Polish assets. The WIG20 stock index in Warsaw advanced almost 3% despite global markets’ selloff as U.S. bond yields approach 5% and the war between Israel and Hamas threatens to expand. Morgan Stanley strategists are more bullish on Polish stocks, expecting further gains and citing the prospect that pro-EU policy would unlock billions in funding.
Poland saw strong growth under PiS, but the opposition win is likely to lead to a sustained rethink on the attractiveness of Poland’s proposition with a new administration, likely led by former European Council President Donald Tusk, undoing judicial overhauls in exchange for which the EU is poised to unlock €35 billion in EU aid.
Poland’s economy also stands to benefit as its leaders tack back to the European mainstream, with expected improvements in rule-of-law and governance standards seen luring portfolio and Greenfield investors. However, the transition of power could get drawn out over two months, fiscal policies by the incoming coalition may be looser than ideal during a period of spiking borrowing costs, and President Andrzej Duda may veto the administration’s larger reform efforts.
