Illustrative stock photo (source: Sme)
Export-driven economic growth and foreign direct investments are among the factors that the Fitch Ratings agency mentioned when it evaluated Slovakia with the same ranking as last November.
Slovakia maintained its A rating with a negative outlook, the same rating the agency granted in November 2020. Financial resources from the renewal plan will help stimulate economic growth. The automotive industry remains competitive also thanks to government stimulus, the TASR newswire reported.
Stable position of financial markets
Fitch wrote that the greatest driving force in the Slovak economy are the positive outcomes of competitive economic growth based on export, a stable inflow of foreign direct investments and membership in both the EU and the Eurozone.
The negative outlook owes to Slovakia’s uncertainty in regards to post-pandemic recovery and its impact on its fiscal finance, TASR wrote.
With the new seven-year budget of the EU, Slovakia will likely maintain its stable position in the financial market by benefiting from resources in the EU Next Generation apparatus.
The country could gain up €6.3 billion in grants and loans for public investments between 2021 and 2026 from the Next Generation EU fund.
“The Ffnancial resources of NGEU will contribute to the growth of the economy in 2021 by 0.7 percent and by a whole percent in 2022. The largest growth of investments will appear after 2023,” Fitch forecast as quoted by TASR.
The fastest economy in the region
According to the agency, Slovakia’s economy will obtain a GDP growth of 4.5 percent, with that number climbing to 5.5 in 2022, which will make it the fastest growing economy in Central and Eastern Europe.
Public finances will be weighed down by a significant fiscal impulse and by pressure on output. The expected worsening of general government balance in 2021 is 0.9 percent to 7.1 percent of GDP.
Industry as such was fairly quick to adjust to the restrictions that came with the pandemic.
Despite a year-on-year decrease of 17 percent experienced by the automobile industry in 2020, it remains the most cost-competitive given favourable infrastructure and government stimulus.
The agency highlighted that the Slovak banking sector is well capitalised with quality assets, which creates an investment-friendly environment.
