WARSAW – The IMF said on Tuesday it expects strong economic expansion within central European heavyweight Poland in 2017, but has identified controversial domestic policies and slow euro zone growth as downside risks for the country later on.

Growth in Poland is likely to accelerate to 3.7 percent in 2017 from an estimated 3.5 this year, thanks to “strong private consumption supported by the new child benefit scheme, before moderating over the medium term,” the IMF said in a report following an annual consultation.

The IMF’s growth estimate for this year is slightly weaker than the Polish government’s own forecast of 3.6 percent. The Fund cautioned however that “financial market volatility and a marked slowdown in emerging markets could propagate into Poland.”

Domestically, “controversial policy initiatives or fiscal slippages could worsen investor sentiment and hinder economic expansion.”

Earlier, Poland’s populist Law and Justice (PiS) government won an October 2015 election on promises of generous social spending.

The IMF said it expected spending to increase “the budget deficit to 2.8 percent of GDP in 2016 and to over 3 percent of GDP in 2017”, compared to 2.6 percent in 2015, before a planned return to fiscal consolidation from 2018.

The Washington-based institution also said, “proposals to convert foreign currency mortgages into zloty, if implemented, could undermine financial stability and further dent market confidence.”