Fitch Ratings has affirmed Małopolska Region's international long-term foreign and local currency debt rating at A-. The agency considers the rating outlook to be stable.

According to Fitch, Małopolska's financial situation is "good enough to maintain the assigned ratings at the current level, despite the negative economic effects caused by the coronavirus pandemic, which, with some delay, may translate into lower CIT revenues in 2021."

Fitch recalled that Małopolska ranks fifth out of 16 Polish regions in terms of contribution to the country's GDP. In 2018, that share was 8.1 percent. The region's economy is diversified and service-oriented, but it is characterized by large disparities in the development of individual subregions. At the end of 2020, the unemployment rate in Małopolska was 5.3 percent, lower than the national average (6.2 percent).

Małopolska's risk profile was assessed as "medium," similarly to other Polish voivodeships. Małopolska's risk profile rating consists of a "strong" rating for expenditure flexibility, as well as "medium" ratings for the remaining factors: revenue stability, expenditure stability, and stability and flexibility of liabilities and liquidity of the province.

In the rating scenario for Małopolska, the agency assumed a 10 percent decline in CIT revenues in 2021, followed by a slight rebound starting in 2022. The region's operating surplus may drop to around PLN 130 million in 2021 and remain at a similar level in subsequent years.

"In Fitch's view, the deterioration of the province's operating results does not threaten the implementation of planned investments (a total of PLN 2,233 million in 2021-2025). These expenditures will constitute 31 percent of total expenditures on average annually and will be financed 57 percent from property income, leading to budget deficits and an increase in the voivodeship's debt." - it wrote.

As a result, Fitch expects Małopolska's net debt to grow to PLN 803 mln at the end of 2025. (in 2020, it was PLN 396m), but will remain moderate at around 70% of operating income.



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