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Slovakia’s rating gets improved outlook

AS OF early October, one of the major credit rating agencies has a brighter outlook on Slovakia’s economic prospects, but the country’s creditworthiness remains unchanged.

AS OF early October, one of the major credit rating agencies has a brighter outlook on Slovakia’s economic prospects, but the country’s creditworthiness remains unchanged.

Moody’s revised its forecast for Slovakia from negative to stable, but opted to keep its credit rating at the A2 level, something not expected to change in the short term, the SITA newswire reported.

Slovakia’s improved outlook came due to expectations that its public debt in 2014 will stabilise below 57 percent of GDP, Moody’s said, as reported by SITA. The agency also trusts the government’s commitment to preserve the sustainability of public finances.

The pace of fiscal consolidation is expected to be slow, but it should be aided by the expected economic revival.

“The reasons for the improved outlook of the rating of Slovakia are linked with the trustworthy and successful fiscal policy that the government of the Slovak Republic has been carrying out,” Finance Minister Peter Kažimír reacted, as quoted by the TASR newswire.

Slovakia’s macroeconomic factors however do not reflect a revival. In particular, the country’s exports slowed as compared to 2011 due to lower demand from abroad. Moody’s expects domestic consumption to grow in the medium to long term, SITA wrote.

The agency anticipates that Slovakia’s economic growth will rise to 2.8 percent in the next year, compared to the current 0.9 percent. Another reason for Moody’s improved rating is the limited impact of the debt crisis on Slovakia. The country’s financial system is firm and healthy, SITA reported.

Thanks to the healthy financial sector and favourable conditions of debt financing there has only been limited impact of external shocks based on the debt crisis in the eurozone, Moody’s concluded, as reported by TASR. The agency deems the Slovak banking sector to be the most liquid in Europe, well capitalised and flexible in lending to the government, TASR wrote.

Another rating agency, Standard & Poor’s, kept Slovakia’s rating on the A level with a stable outlook, while the most recent rating by the Fitch agency is an A+ with a stable outlook. Moody’s was the only agency to evaluate Slovakia with a negative rating outlook since February 2012.

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