Polish stocks and bonds — among the world’s stand-out performers of 2025 — declined after a nationalist unexpectedly won the presidential election, dealing a blow to the government.
Markets are concerned that the win by the resurgent right, which has been emboldened by Donald Trump, may unravel Poland’s pro-European Union tilt and cut short the rally. Warsaw’s benchmark stock index dropped as much as 3.4% in early trading, while the zloty and government bonds were also in the red.
Karol Nawrocki, a conservative historian and former boxer, won 50.9%, while centrist Rafal Trzaskowski took 49.1%, according to Bloomberg News calculations based on data from 100% of precincts reported by the electoral commission.
His win may jeopardise Prime Minister Donald Tusk’s ambition to return Warsaw to the EU mainstream and maintain bloc funding. The premier may call a parliamentary vote of confidence in his cabinet, website Onet.pl reported on Monday.
“This election result may worry foreign investors,” said Piotr Bujak, chief economist at PKO Bank Polski. The outcome “will hinder the implementation of necessary reforms and may favor the maintenance of an excessively loose fiscal policy. As a result, the zloty and bonds may come under some pressure,” he said.
More downside
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Henrik Gullberg, a macro strategist at Coex Partners, said there was more downside if Nawrocki wins than upside in case of a Trzaskowski victory, “given that both Polish stocks and currency are among the top performers year-to-date”.
Poland’s WIG20 equity index traded 2.1% lower as of 9.14am in Warsaw, with banks leading the sell-off. The gauge was up 40% in dollar terms this year as of Friday’s close, one of the strongest rallies globally.
Poland’s dollar-denominated bonds were among the worst performers among developing-market peers on Monday. The zloty slipped as much as 0.6% against the euro to 4.2765, the weakest level since May 19, before paring the slide.
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“A Nawrocki win is thought to revive tensions with Brussels, stall judicial reforms, and therefore jeopardise access to over EUR130 billion ($190.86 billion) in crucial EU funding,” Gullberg said.
The yield on benchmark 10-year local-currency government bonds increased 10 basis points to 5.46% on Monday. The asset class has returned nearly 16% in dollars since December, the best performance among developing markets after Brazil and Mexico.
Poland’s fiscal deficit is front and center for investors: at more than 6% of economic output it’s the largest in the EU after Romania’s. Election campaign promises risk further deepening the budget hole.
“The political backdrop means little chance of fiscal consolidation in the coming years, whatever is the outcome of the presidential elections,” Mai Doan, an economist at Bank of America, said before the ballot. She expects only a short-lived impact on markets from Sunday’s election.
Feared stalemate
The election outcome is likely to exacerbate Poland’s problems, according to Commerzbank AG currency analysts Michael Pfister and Charlie Lay. Tusk’s policy agenda has been largely thwarted by outgoing President Andrzej Duda, who, like Nawrocki, is backed by the Law & Justice party.
“It is feared that this stalemate will continue,” they wrote in a note on Monday. “Similarly, the disbursement of EU funds, from which Poland has benefited significantly in recent years, is likely to be further delayed,” given the conflict between Law & Justice and the EU Commission.
Piotr Matys, a strategist at In Touch Capital Markets, said selling pressure on the zloty may increase on Monday if Nawrocki wins. The result creates a tail risk “that Tusk’s coalition may collapse leading to early general elections”, he said.
