Fitch Sees Negative Changes on Polish Local Government Ratings

Dec. 20 (Bloomberg) -- Fitch Investors Service expects “negative rating actions and outlook revisions” on local and regional governments in Poland next year as revenue growth fails to keep pace with spending, the company said in an e-mailed statement today.

“In 2012 the operating and budgetary performance of local governments is likely to further weaken, constraining the sector’s self-financing capacity,” Fitch said, adding that this would boost debt and risks regarding the implementation of strategic infrastructure projects.

Local governments’ operating expenditures may increase by 7 percent next year, outstripping a 5 percent rise in revenue, as the government has transfered new responsibilities to these authorities without providing sufficient revenue, Fitch said in the statement.

There will be “exceptionally high” pressure to complete capital expenditures on roads, transport, water and waste management projects co-funded by the European Union in 2012-2014, resulting in 50 billion zloty of outlays in 2012 alone, the ratings company said.

Such spending may increase Polish local and regional governments’ debt by 10 percent to 15 percent next year from about 62 billion zloty at the end of 2011, Fitch said.

The City of Warsaw’s 2014 Eurobond yield rose to 4.1013 percent today from 4.0956 percent yesterday, according to data compiled by Bloomberg.

--Editor:

To contact the reporter on this story: David McQuaid in Warsaw at dmcquaid1@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net