The international FitchRatings (Fitch) agency has affirmed Slovakia's long-term foreign-currency issuer default rating (IDR) at 'A' with a negative outlook, the Finance Ministry reported. According to the ministry, the current rating is supported by Slovakia's EU and eurozone membership that underpins a relatively stable and credible macro-economic framework and steady EU capital inflows, as well as a competitive export sector and stable foreign direct investment.
Fitch forecasts Slovakia's GDP growth of 1.9 percent in 2024 and 2.5 percent in 2025 as domestic consumption normalises and export performance benefits from some additional automobile capacity coming on stream. Its analysts further expect a modest improvement in the net external debt position to under 30 percent by 2025, as well as a rapid narrowing of the current account deficit to an average of 2.1 percent in 2023-2025, similar to pre-pandemic levels. "Fitch also views Slovakia's banking sector, which is stable, profitable and has good asset quality, as a strength," said the Finance Ministry.
The negative outlook reflects risks stemming from an unclear policy framework after the upcoming September election, in particular around fiscal consolidation, and the ongoing uncertainty over the fiscal and macroeconomic impact from the war in Ukraine and the related energy crisis. The outlook might turn into positive if the general government debt was put on a downward path.
Meanwhile, Slovakia's rating might be downgraded in the case of insufficiently credible fiscal consolidation, which would lead to permanent fiscal deficits and a sharp deepening of the public debt/GDP ratio compared to 58 percent expected in 2025. However, the stabilization of the debt at this level requires the adoption of consolidation measures so that the deficit falls from the expected over 6 percent of GDP this year to 3.6 percent of GDP in 2025. "Therefore, the Finance Ministry is working on a credible list of measures aimed at the recovery of public finances, and it will be important for the new government emerging from the September snap election to take a responsible approach to this issue," added the Finance Ministry.
Source: TASR
