Moody’s wrote in a report published on Wednesday that the agency decided to upgrade the outlook because business prospects of Polish banks would improve as Poland’s GDP would grow by 2.8% in 2024, up from 0.2% in 2023.

The agency also said that inflation had gone down, but it also admitted that it was likely to slightly grow following the Polish government’s decision not to prolong zero VAT on foodstuffs.

The Polish Finance Ministry announced on March 12 that a zero-VAT rate on certain food products would not be extended beyond March 31, due to falling inflation.

The special rate was introduced in January, 2022, when the inflation index stood at 9.2%.

Poland’s consumer prices in February 2024 rose by 2.8% year on year and 0.3% month on month.

The agency also recalled that Poland’s Monetary Policy Council (MPC) cut its reference rate by 100 Basis Points (bps) to 5.75% in the third quarter of 2023, and added that lower interest rates and growing wages would increase demand for credit. And this, in turn, will increase the banking sector’s profits, it said.