Poland’s recent presidential election results triggered moderate declines on the Warsaw Stock Exchange. The broad WIG index fell by 0.56%, and the blue-chip WIG20 dropped by 0.6%, although losses initially exceeded 1%. While the immediate reaction was relatively contained, ongoing political uncertainty could weigh on Polish equities for a longer period. Additionally, the Monetary Policy Council (RPP) may become more cautious about cutting interest rates due to rising instability—making it likely that rates will remain unchanged in Wednesday’s decision.
A Strong Run Disrupted by Political Risks
In recent months—indeed, since the previous parliamentary elections—the Warsaw Stock Exchange has performed strongly. Year-to-date, the WIG index has gained over 25%, while the WIG20 has increased nearly 22%, making Poland’s stock market one of the world’s top performers.
However, the election of Karol Nawrocki introduces a new layer of political uncertainty. The Polish president holds the power to veto legislation and influence foreign policy, including relations with the European Union. Tensions between the presidency and the government could slow decision-making processes, undermining investor confidence, which heavily depends on political stability.
In the short term, this uncertainty may weaken foreign investor appetite for Polish equities. International capital increasingly factors political risk into its investment decisions—especially in emerging markets. This could negatively impact the performance of listed companies with significant state ownership.
State-Controlled Firms Could Be Most Exposed
Although the president’s influence on economic policy is limited, the Polish stock market includes a large number of companies dominated by state ownership. This means escalating political conflicts could directly affect share prices—and in some cases, operational results—of these firms. As a result, the WIG20, which includes Poland’s largest and most state-influenced companies, could suffer more than the broader WIG index.
While Nawrocki has criticized some of the policies of the previous PiS government (2015–2023), there may be areas of potential cooperation with the current administration. One such area could be deregulation, a topic the government has recently been focused on. Joint efforts here could support Polish entrepreneurs and the broader economy.
Tax Pledge Welcomed by Markets
During his campaign, Nawrocki pledged to oppose any tax increases, a stance that markets may view positively amid concerns over the country’s budget deficit and rising debt levels. Poland is currently under the EU’s Excessive Deficit Procedure, and defense spending now consumes 5% of the national budget—posing a significant fiscal challenge.
Interest Rate Outlook: Greater Caution Ahead?
The outcome of the presidential election—and the accompanying rise in market uncertainty—may push the Monetary Policy Council (RPP) toward a more cautious stance on interest rate cuts. This could lower the likelihood of a rate cut at the June meeting.
Author: Paweł Majtkowski, Analyst at eToro Poland
Source: ceo.com.pl
