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Moody’s downgrades Slovakia’s sovereign debt rating

Uncertainty over the prospects for institutional reform in the eurozone and the weak macroeconomic outlook across the region were the main reasons given by Moody’s Investors Service for its decision to downgrade the rating of six countries, including Slovakia. The country’s rating was decreased from A2 to A1 and its outlook changed to ‘negative’, the SITA newswire reported.

Uncertainty over the prospects for institutional reform in the eurozone and the weak macroeconomic outlook across the region were the main reasons given by Moody’s Investors Service for its decision to downgrade the rating of six countries, including Slovakia. The country’s rating was decreased from A2 to A1 and its outlook changed to ‘negative’, the SITA newswire reported.

Another reason which contributed to Moody’s decision was Slovakia’s increased susceptibility to financial and political event risk, presenting considerable challenges to achieving the government’s fiscal consolidation targets and reversing the adverse trend in debt dynamics. The rating agency also warned against the increased downside risks to economic growth caused by weakening external demand, SITA wrote.

Analysts agree that the current downgrading of Slovakia’s rating particularly reflects the current situation in the eurozone.

“This situation has an impact also on the countries whose trade is dependent on the eurozone,” said UniCredit Bank analyst Dávid Dereník, as quoted by SITA.

Although the lower rating might worsen the position of Slovakia on the international financial markets, investors are quite prudent and will not react immediately to Moody’s decision, according to Dereník.

On the other hand, Poštová Banka analyst Eva Sadovská said she expects the lower rating could affect the yields which creditors demand from Slovakia to lend it money. However, she admitted that the country is already paying a certain risk surcharge.

Source: SITA

Compiled by Radka Minarechová from press reports
The Slovak Spectator cannot vouch for the accuracy of the information presented in its Flash News postings.

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