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With most of Europe staring down the barrel of ratings downgrades, Poland had the right to some self-satisfaction on Tuesday morning. Moody’s reaffirmed the country’s A2 credit rating with a stable outlook, citing its “strong and proven track record” of economic stability – the kind of comment some big western European countries can only dream of.

Poland is central and eastern Europe’s biggest economy and the only country in the European Union to have avoided recession after the 2008-09 crisis. And although its economy has stumbled recently, with some indicators suggesting there is worse to come, it is likely it will grow more slowly in 2012 rather than contract.

Here is Moody’s rationale:

The main driver underlying Moody’s decision to affirm Poland’s ratings is the remarkable resilience of the country’s economy during the global credit crisis and its subsequent rapid recovery to more trend-like growth rates. Poland is a diverse and an increasingly high-value-added economy. The country’s inflation targeting and flexible exchange rate regimes have been important in maintaining macroeconomic stability and bolstering investor confidence. Moreover, the country’s main political parties support the current macroeconomic model which ensures policy continuity.

And Moody’s remains cautiously optimistic about Poland’s government which it says has pursued “credible fiscal consolidation”. This, says Moody’s, should reverse a deterioration in Poland’s fiscal accounts and put and end to “negative debt dynamics”.

In particular, Moody’s notes that Poland’s resilience has been underpinned by the government’s willingness to confront issues constraining growth – low rates of domestic savings and investment, poor infrastructure and a relatively high cost of doing business:

The Polish government has addressed these issues with (1) ambitious productivity-boosting capital expenditure in the country’s road and transport infrastructure since the onset of the crisis; and (2) a strong reform program, focused on increasing competitiveness and productivity and boosting medium-term revenues and the sustainability of public finances. The reforms include unpopular measures such as increasing the retirement age as well as cost-cutting measures beginning in 2012, a key year for fiscal consolidation.

Warsaw is indeed calling for a further steep reduction in the budget deficit, insisting it will fall below 3 per cent of GDP in 2012 after a target of about 5.6 per cent this year. It also plans to cut public debt from 55 per cent of GDP his year to 52 per cent in 2012 and to 47 per cent by 2015, when it forecasts a 1 per cent budget deficit.

Moody’s was also reassured by Poland’s fully floating exchange rate and, most importantly, by its $30bn flexible credit line from the International Monetary Fund which it renewed in January:

In Moody’s view, the FCL serves as an anchor for market confidence and offers an efficient and cost-effective allocation of resources, thereby effectively acting as an “insurance policy” that provides adequate financial coverage even under extreme conditions.

Poland’s rating is the same as Italy’s and Malta’s, and one level below neighboring Slovakia and the Czech Republic, according to Bloomberg.

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