Poland's fiscal performance stronger than expected

Poland's economy continues to do well, the fiscal performance has been stronger than expected recently and the targets for 2016 look achievable. Poland central bank's mandate is also likely to remain intact but interest rates could be cut if the ECB cuts rates aggressively in March.

However,  potential economic and fiscal ramifications outweigh political gains for the government. The main risk come from Poland's relations with the EU. If there is any further deterioration and/or the government embark on new controversial policy measures, investors may loose confidence in the government.

"We raise our real 2016 GDP growth forecast to 3.8% (above consensus), from 3.5%. We see EURPLN trading around current levels for the next three months due to the uncertain policy environment but then moving gradually towards 4.20 in the latter half of the year as the political risk premium abates." notes Danske Bank in a report.