Announcements

    Drinks

      Scope completed a monitoring review of the Republic of Slovakia
      FRIDAY, 21/04/2023 - Scope Ratings GmbH
      Download PDF

      Scope completed a monitoring review of the Republic of Slovakia

      Monitoring review announcement.

      Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns, and supranational organisations.

      Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial-market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

      Scope completed the monitoring review for the Republic of Slovakia (long-term local- and foreign-currency issuer and senior unsecured debt ratings: A+/Negative; short-term local- and foreign-currency issuer ratings: S-1+/Negative) on 17 April 2023.

      This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

      For the updated rating report accompanying this review, click here.

      Key rating factors

      The Republic of Slovakia’s long-term A+/Negative ratings are underpinned by the country’s institutional strengths, among which EU- and euro area memberships. Slovakia has a strong reserve currency, access to ECB asset purchases and refinancing operations, as well as a strong fiscal framework reinforced by the European fiscal rules. Furthermore, Slovakia’s ratings recognise access to substantive EU structural and recovery funds, moderate levels of public debt, and a competitive export-oriented industrial base, anchored by sustained foreign direct investment inflows.

      However, Slovakia remains reliant on Russian energy supply, which still account for 43% of total energy imports as of October 2022. GDP growth rate is expected to decelerate at 1.4% in 2023 (1.7% in 2022) and inflation to average 10% in 2023 (12.1% in 2022), one of the highest in the euro area and Central and Eastern Europe. Measures introduced to mitigate the impact of the energy crisis for households and corporates explain the widening of the budget deficit at 5.5% of GDP in 2023 (-3.5% in 2022). Despite the strength of Slovakia’s fiscal framework and robust GDP growth rates, which drive the projected stabilisation of public debt around 60% of GDP, heightened political uncertainty is a risk on Slovakia’s medium-term fiscal trajectory because of potential adverse consequences on the reform agenda and the disbursement of European funds, among which the Recovery and Resilience Plan.

      Challenges relate to Slovakia’s ratings include: i) over-reliance on Russia’s energy calling for a swift diversification of supply; ii) high exposure to external demand and global value chains, mostly through the automotive industry; and iii) debt trajectory exposed to adverse demographic trends.

      The Negative Outlook represents Scope’s view that risks to the ratings are tilted to the downside over the next 12 to 18 months.

      The ratings could be downgraded if, individually or collectively: i) GDP growth prospects decline materially due for example to a disorderly energy supply transition and/or a weakening of external demand; ii) the rise in public debt to GDP ratio is larger than anticipated due for example to sustained delay in fiscal consolidation; and iii) persistent political uncertainty and/or a shift in policy priorities weaken the reform agenda and relations with European institutions.

      Conversely, the Outlook could be revised to Stable if, individually or collectively: i) GDP growth prospects are stronger than anticipated due for example to a swift diversification of the energy supply and/or a robust reform momentum demonstrating strong resilience to external shocks; and ii) the evolution of public debt to GDP ratio is more favorable than currently anticipated based on a sustained fiscal consolidation post elections.

      The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 September 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
      This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
      Lead analyst Thomas Gillet, Associate Director.

      © 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Investor Services GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.
       

      Related news

      Show all
      Scope has completed a monitoring review on the United States of America

      21/6/2024 Monitoring note

      Scope has completed a monitoring review on the United States ...

      Scope publishes updated supranational methodology following call for comments

      21/6/2024 Research

      Scope publishes updated supranational methodology following ...

      Global economic update: soft landing reinforces prospect of higher-for-longer interest rates

      19/6/2024 Research

      Global economic update: soft landing reinforces prospect of ...

      Belgium: nationalist parties raise risk of political gridlock and deterioration of fiscal outlook

      14/6/2024 Research

      Belgium: nationalist parties raise risk of political gridlock ...

      Europe’s shifting political landscape, limited fiscal space are challenges to closing investment gap

      12/6/2024 Research

      Europe’s shifting political landscape, limited fiscal space ...

      Scope withdraws its UK Social Housing Providers Rating Methodology

      11/6/2024 Research

      Scope withdraws its UK Social Housing Providers Rating ...