Fitch Ratings – Warsaw – 26 Feb 2021: Fitch Ratings has affirmed the Polish City of Poznan’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at ‘A-‘. The Outlooks are Stable.
The affirmation reflects Fitch’s unchanged view that Poznan’s operating performance and debt ratios will remain sound over the medium term, despite an economic downturn triggered by the coronavirus pandemic. Fitch assesses Poznan’s Standalone Credit Profile (SCP) at ‘a+’ and the city’s ratings remain capped by the sovereign at ‘A-‘.
Revenue (Robustness): ‘Midrange’
We assess Poznan’s revenue robustness as ‘Midrange’ in view of the city’s stable revenue sources, with revenue growth prospects above national GDP growth. Tax revenue accounts for about 50% of Poznan’s operating revenue, of which about 90% is not particularly dependent on economic cycles. Current transfers account for more than 35% of operating revenue, with the majority transfers from the state budget (A-/Stable) defined by law. Until 2020 the city had a track record of revenue growth well above GDP growth, underpinned by the city’s wealthy economy.
In 2020 the city’s revenue was affected by the central government’s decisions to cut personal income tax (PIT) rates, as a result of which tax revenue fell by 1.3% to PLN1,929 million versus CAGR of 8.2% in 2015-2019. The pandemic and lockdown measures also had an impact on the city’s revenue, with public transport ticket revenue down by 30% (decline of about PLN54 million to PLN127 million in 2020). The pandemic has only slightly reduced the city’s revenue from corporate income tax revenue (by 6.7%) or property transfer tax paid on real estate transactions (by 3.7%).