Fitch downgrades Slovakia. The outlook is stable


Fitch Ratings has downgraded Slovakia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘A’ from ‘A+’. The Outlook is stable.

Fitch forecasts that real GDP will shrink by 10% in 2020, as Slovakia’s open economy is hit by the COVID-19 pandemic. External demand will be significantly weaker and restrictions on activity will depress domestic demand.

A lockdown of economic activity (in place since 13 March) will be progressively loosened from mid-May and the economy will begin recovering from the second half of 2020, with growth forecast at 6.8% in 2021.

The auto industry, which accounts for 13% of GDP and 24.2% of exports (2018), shut down production as the lockdown was imposed, before restarting phased operations from mid-April. Fitch expects that planned investments for capacity expansion will be subject to renewed uncertainty given that external demand will take time to recover.

Fitch has sharply revised its general government balance forecast downwards to -7.7% of GDP for 2020 (previous review: -0.8%; 2019: -1.3%), compared with a current peer median of -8.5%.

The government has announced support measures worth around 6% of GDP, which will comprise direct fiscal support, liquidity support and guarantees.

Of these, the fiscal cost of wage payments under the Kurzarbeit scheme is expected to amount to 1.6% of projected 2020 GDP, while the introduction of a recurring 13th month pension will cost an estimated 0.7% of GDP.

Fitch expects revenue to decline by 10.5% in 2020 (equivalent to 1.1pp of GDP), as tax and social security receipts fall due to the economic contraction.

- Advertisment -


World’s 500 largest family businesses grew their revenue by 10%

The 500 largest family businesses generate US$8.02t and employ 24.5m people across 47 jurisdictions, according to 2023 EY and...

Must read