Analyst: Slovakia Hasn't Yet Completely Won Out in Case of Rating

Bratislava, 27 October (TASR) - Standard & Poor's (S&P) has confirmed Slovakia's A+ rating with a negative outlook for the time being, with the negative outlook reflecting the risks associated with geopolitical tensions and rising protectionism, which may hamper economic growth and complicate the consolidation of public finances, Slovenska sporitelna bank analyst Matej Hornak stated on Monday, adding that although the rating remains unchanged for now, the risks remain and Slovakia hasn't yet completely won out. The analyst noted that S&P continues to rate Slovakia two notches better than the other two major rating agencies. The outlook was changed from stable to negative in April of this year. The key reason, in the agency's view, was tensions in foreign trade due to US tariffs, which could negatively affect the growth of the Slovak economy consequently hampering the government's consolidation efforts and keeping the public debt versus gross domestic product (GDP) on an upward trajectory. "It is this effect that is the main risk highlighted by the agency in its spring assessment, and which could bring about a downgrade in the next 12-24 months," he said. "If we focus on public debt relative to GDP, it's influenced by the development of two indicators, namely the deficit, which is subsequently translated into public debt, and nominal GDP. Therefore, it's important how the government's efforts to consolidate public finances continue to develop and, at the same time, how the Slovak economy, and therefore GDP growth, but also the development of public revenues, will fare. Other important factors include the efficiency of institutions and the government, which affects, for example, the use of EU funds," he noted. Hornak pointed out that the most recent auction of government bonds also showed that investor interest in Slovak securities persists. The risk premium on ten-year government bonds against German ones has decreased by about 40 basis points over the past year and is currently at around 80 points. It's mainly being influenced by the geopolitical situation and growing protectionism, which is having a negative impact on European economies, including the Slovak one. "Given the current level of the deficit, consolidation will have to continue. The rating agency appreciates the government's (so far only declared) efforts to continue 'cleaning up' public finances via improved collection of existing taxes and on the expenditure side, as revenue measures are in our view largely exhausted. At the same time, however, the government needs to present pro-growth measures to support the business environment, investment activities, research and innovation," added the Slovenska sporitelna bank analyst. am/df