Fitch downgraded Slovakia's sovereign rating to A- with a stable outlook

Fitch downgraded Slovakia's sovereign rating to A- with a stable outlook from the previous A with a negative outlook. This is the worst rating since 2004. The agency points at the poor state of public finances, with spending rising rapidly and the new government's consolidation strategy unclear. The agency has taken into account the €2bn worth of measures presented by the cabinet, but says public debt will continue to rise to 65% of GDP in 2027. Further challenges include falling labor productivity, lack of investment outside the automotive sector and political instability. If the quality of governance and relations with the EU deteriorate, a further downgrade is possible. A worse rating will increase the costs of servicing public debt.

Moody’s and S&P agencies have recently kept their ratings at A2 and A+, respectively.

(RRZ)