Fitch confirms Slovenia's credit rating
On Friday, 17 July 2020, Fitch Ratings affirmed Slovenia's credit rating at 'A' with a stable outlook.
Since the outbreak of the COVID-19 pandemic, this is the third confirmation of Slovenia’s rating. In April the country’s credit rating was affirmed by Moody’s, rating Slovenia at Baa1 with a positive outlook, and in June by Standard & Poor’s at AA- with a stable outlook.
Fitch Ratings’ affirmed credit rating recognises Slovenia’s strong political and institutional effectiveness and focus on the development of healthcare, education and human development in general. The stable outlook reflects Slovenia’s economic resilience to the effects of the COVID-19 pandemic, which it achieved due to the successful reduction of external, financial and fiscal imbalances in recent years. The sound responses of fiscal policy in the past build some confidence that fiscal deficits associated with the response measures to mitigate the effects of COVID-19 will be unwound as the crisis caused by the pandemic begins to recede.
In view of macroeconomic indicators, Fitch expects Slovenia's economy to contract by 7.1% of GDP in 2020 and forecasts growth to bounce back to 4.9% in 2021. According to the rating agency’s projections, a budget deficit of 7.8% of GDP in 2020 is forecast due to COVID-19-related measures; however, it is expected to begin narrowing in 2021. This will lead to a rapid rise in public debt to 80.3% of GDP by the end of 2020, which should start to decline in 2021. Fitch Ratings recognises that the Slovenian financial sector is better supported by a liquid and well-capitalised banking system, which enables it to effectively deal with the effects of the pandemic.
According to the agency, among the reasons for the favourable projections of macroeconomic indicators are the government’s effective containment measures that allowed a relatively short period of lockdown and the authorities' extensive support programmes which are mitigating the negative effects of the pandemic on the labour market and helping sustain companies' financing conditions.
Fitch Ratings affirmed credit rating is more proof that Slovenia, despite difficult circumstances, remains a stable and trustworthy country.