RRZ: Deficit Still Above Levels Typical of 'A+' Rating despite Consolidation

Bratislava, 25 April (TASR) - Despite three consolidation packages, Slovakia has not reduced its deficits to levels typical of countries with an 'A+' rating, the Council for Budget Responsibility (RRZ) stated on Saturday in response to the downgrade of Slovakia's rating by the Standard and Poor's (S&P) agency, noting that it's now at the lowest level seen in twelve years. Conversely, a significant slowdown in economic growth, as well as government's communication prioritising other goals ahead of parliamentary elections, have contributed to S&P's decision to lower Slovakia's rating to 'A', according to RRZ. S&P justified its Friday (24 April) decision by insufficient progress in the fiscal consolidation efforts and a significant economic slowdown, projecting gross domestic product (GDP) growth at a modest 0.5 percent, with general government deficit expected to widen to 4.7 percent of GDP this year. "At the same time, the agency has warned that the rating could be lowered further if the position of independent and supervisory institutions is eroded. Furthermore, weaker economic growth combined with looser fiscal policy leading to higher deficits and an increase in public debt would also be a negative factor," explained RRZ. On the other hand, Slovakia's rating could rise again if the economy grows significantly faster and deficits fall considerably, along with the debt starting to decline, according to RRZ. Following the current change, Slovakia's rating from S&P is now on par with countries such as Lithuania, Latvia, and Croatia, stated RRZ. France, Portugal, and Spain are one notch higher, while Malta, Poland, and Cyprus are one notch lower. RRZ also noted that S&P's rating remains higher compared to those from the other two major agencies, Moody's and Fitch, which lowered Slovakia's ratings in December 2024 and December 2023 respectively. The Finance Ministry stated that the move was expected, as S&P's previous rating was two notches higher compared to other agencies. The main reasons primarily include negative external factors slowing down the economy, such as problems faced by Slovakia's largest trading partners in the EU, energy risks, the oil crisis, and global uncertainty. The agency was also concerned about the 13th pension payment which, however, remains a priority for the Slovak government. jrg