Moody's Ratings downgraded Poland's long-term senior unsecured and issuer ratings to A3 from A2 on what it described as persistent large fiscal deficits that are leading to a material increase in public debt.

The outlook was revised to stable from negative.

The ratings agency on Friday also cut the country's foreign-currency senior unsecured shelf and medium-term note program ratings to (P)A3 from (P)A2. Poland's short-term issuer ratings were dropped to Prime-2 from Prime-1.

Poland's fiscal policy effectiveness has weakened as authorities haven't rebuilt buffers during more favorable economic conditions, Moody's said. The agency expects Poland's government deficit will remain elevated at around 7% of GDP both this year and next, despite economic growth.

A growing share of debt accumulation has occurred outside the scope of the national debt rule, which has also eroded Poland's national fiscal framework, Moody's said.

The stable outlook reflects balanced risks at the A3 rating level. Moody's views Poland as having robust, strong economic growth and a stabilization of the general government debt burden in the range of 70% to 75% of GDP in the late 2020s.

As part of its ratings actions, Moody's lowered Poland's local- and foreign-currency country ceilings to Aa2 from Aa1.