Fitch affirms Czech Republic’s rating at A+, outlook stable

By bne IntelliNews May 16, 2014

Fitch Ratings has affirmed the Czech Republic’s long-term foreign and local currency Issuer Default Ratings (IDRs) at A+ and AA-, respectively with a stable outlook, the ratings agency said in a statement. The issue ratings on the Czech Republic's senior unsecured foreign and local currency bonds are also affirmed at A+' and AA-, respectively. The Country Ceiling is kept AA+ and the short-term foreign currency IDR at F1.

The country’s ratings are underpinned by its strong macroeconomic policy framework, low public and private sector indebtedness and a fairly flexible labour market that has helped to prevent rises in unemployment through the recession, Fitch said. The country’s fiscal deficit and gross debt, at 1.5% of GDP and at 46% of GDP at end-2013, are both below the respective A medians of 2.2% and 52.3%. Private sector debt stands at 72% of GDP, well below the EU’s average of 157%.

Fitch expects the fiscal stance of the new government to lead to a slightly wider fiscal deficit but it should stay under EU’s ceiling of 3% of economic outlook in both 2014 and 2015.  

Improved eurozone outlook, accommodative monetary policy and a renewed public investment drive will help the Czech economy grow 1.9% in 2014, after a two-year recession. Next year, growth should gain speed to 2.5%, according to the ratings agency.

The country’s ratings are also supported by its stable banking sector and the fact that the Czech Republic is a net external creditor.

Fitch, however, warned that due to the fact that the Czech economy has a high degree of openness, it is exposed to external shocks and the volatility of business cycles of its main trading partners.

Fitch would consider cutting the ratings in case of a severe negative growth shock that damages the country's economic and fiscal stability or fiscal slippage leading to a material rise in the public debt ratio. Conversely, higher economic growth could trigger a rating upgrade.

Related Articles

Fears grow of Russian interference in Central European media space

Two thirds of Central Europeans are concerned about Russian interference in their country’s media or public opinion, according to a new poll conducted by MEDIAN on behalf of the ... more

Four Czechs on Kyrgyzstan skiing holiday killed in avalanches

Four Czech citizens on a skiing holiday were killed in avalanches that occurred in Kyrgyzstan's northern district of Ak-Suu over the weekend, according to the Issyk-Kul regional police department. ... more

Czech Raiffeisenbank profit in 1-3Q 2023 dropped by 27.5% y/y

The Czech branch of Raiffeisenbank (RB) registered a 27.5% year-on-year drop in profits in the first three quarters of 2023 to CZK3.96bn (€162mn). RB’s assets grew by 13.3% to CZK679bn, Czech ... more

Dismiss