S&P affirms Slovakia’s A/A-1 ratings, outlook stable

By bne IntelliNews August 2, 2013

Standard & Poor's Ratings Services has affirmed its A/A-1 long- and short-term sovereign credit ratings on Slovakia, saying that the ratings are supported by the country’s moderate government debt burden, healthy growth prospects, stable banking sector and low net external debt. On the other hand, the country's ratings are constrained by the high structural and youth unemployment and low labor activity rates and wealth levels, which still lag its eurozone peers.

The global ratings agency forecast the Slovak economy, which is highly dependent on auto production and exports, to grow by 0.6% this year, slowing down from 2% in 2012. It noted that there is evidence of a reorientation from traditional automobile exports to Europe, where sales have been volatile, to non-EU export destinations, which provides indication of economic resilience. S&P projects Slovak GDP growth to average nearly 2% over 2013-2016.

On the negative side, S&P noted that Slovakia’s unemployment rate has remained high at over 14%, with youth unemployment particularly high at 35% in 2012, the fourth highest in the EU after Greece, Spain, and Portugal. The agency expects that despite the decelerating growth and high jobless rate, the government will meet its target to cut the 2013 budget deficit to below EU’s ceiling of 3%. It warned, however, that while some unconventional consolidation measures, such as diverting pension contributions away from the second pillar and into the first, improve the budgetary position in the short term, they will reduce policy continuity and weaken the long-term sustainability of public finances. Other measures, like the changes in the labour code, the extraordinary levy on banks and utility companies, and the hike in the corporate income tax rate, have contributed to a higher uncertainty in the operating business environment.

S&P noted also that a decline in imports pushed Slovakia's current account into a surplus of 2.3% of GDP in 2012. It projected the current account surplus to narrow as domestic demand recovers and imports, including those related to investment, rebound, probably next year. The agency expects the economy's gross external debt to be 57% of current account receipts at end-2013.

S&P assigned a stable outlook to the ratings saying it expects the government to stabilise its debt burden through fiscal consolidation, the banking sector to remain stable, and the country's external indebtedness to remain low. Moreover, it projects Slovakia's growth prospects to be supported by investments in productive capacity, financed by private inflows and absorption of EU funds. The agency may upgrade the country’s ratings if its growth potential and faster convergence with eurozone wealth levels are supported by reforms to address supply-side constraints, such as in the labor market, and by improvements in policy effectiveness.

Related Articles

Japan’s Asahi buys a huge round in Central Europe

Asahi has beaten a host of regional heavyweights in the race to buy SABMiller’s Central and Eastern European beer brands, the Japanese brewer announced on December 13. The Asian giant said it ... more

Slovak PM slams media “prostitutes”

Slovak Prime Minister Robert Fico labelled local journalists “anti-Slovak prostitutes” on November 23 as he waded into a case featuring low level corruption allegations only to thrust it into the ... more

Slovak government rejects accusations of corruption over EU presidency events

The Slovak government has rejected accusations that some of its preparations for running the EU's rotating presidency were marred by corruption. Bratislava has been in the headlines since it took ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss