The election of Karol Nawrocki as Poland’s next president by a slim margin has caused profit-taking in one of the top-performing stock markets globally in 2025. The polls caught the market a little off guard, which made sentiment even worse.
The president of Poland has the power to veto laws and block government initiatives, despite the fact that the position is primarily ceremonial.
Although the vote was close, investors who had been sitting on year-to-date gains of 40% in dollar terms through the end of May were interpreting the news adversely as the Polish WIG-20 PL:WIG20 index opened the week.
Now, traders have to determine if the correction is short-term or if it portends a longer-term shift in the sixth-largest European economy’s prospects.
The Law and Justice Party (PiS) candidate, Nawrocki, opposed Prime Minister Donald Tusk’s administration and its pro-NATO, pro-EU policy agenda. U.S. President Donald Trump endorsed him, and Homeland Security Secretary Kristi Noem ran a campaign in Warsaw on his behalf. He is a right-wing Euroskeptic.
Nawrocki has advocated for ideals he has linked to the nation’s Catholic heritage while criticizing the EU’s immigration and climate policies. Despite the fact that most people consider Poland’s presidency to be purely ceremonial, the PiS president has the power to veto laws and so block Tusk’s initiatives because his coalition government does not have a large enough legislative majority to override an opposition president.
Investors will worry that Nawrocki would undermine E.U. unity and further impede Tusk’s legislative agenda, even though he is likely to follow the same course as his predecessor and PiS colleague, Andrzej Duda. From 4.22 in May to a low of 4.27 on Monday morning, the zloty (EURPLN) has begun to trade lower versus the euro as a result. Barclays said in a note this morning that it would drop another 2% to 4%.
Concerns were raised in the Barclays note under the subheading “Another round of cohabitation” that Tusk would opt to conduct a vote of confidence soon in order to avoid a presidential veto and try to increase the consensus for his ruling coalition. Investors have increased uncertainty as a result of political unrest.
However, a weaker currency and policy uncertainty could derail Barclays’ projection that the National Bank of Poland will implement two interest-rate decreases in 2025. Furthermore, with a narrow majority and a presidential veto, Tusk’s government may find it more challenging to enact some of the fiscal tightening measures that the European Commission has called for.
Stocks like Powszechna Kasa Oszczednosci Bank Polski (PL:PKO), Bank Millennium (PL:MIL), and Bank Handlowy w Warszawie (PL:BHW) saw significant declines on Monday, reflecting the selling pressure on the Polish banking industry, which traders view as a proxy for the economic prospects of the eastern European nation. In contrast, the losses recorded by Orlen (PL:PKN) and Polska Grupa Energetyczna (PL:PGE), the market’s top performers this year, were less significant.
Nawrocki defeated opponent Rafal Trzaskowski, a supporter of the Tusk government and the mayor of Warsaw, in the Sunday presidential election.
Separately on Monday, Polish state-controlled insurer PZU (PL:PZU) and Bank Pekao (PL:PKO) announced a possible merger that would result in a merged company with a $26 billion market capitalization, making it the biggest M&A transaction in the past 12 months.
Regarding the planned deal, Citi noted that any immediate positive share-price reaction would eventually be weighed down by uncertainties regarding the distribution of capital benefits and investors now owning shares in a financial conglomerate rather than a bank.
