The Fitch Credit Agency Improved the Assessment of Slovenia from BBB+ to A-

The Fitch Credit Agency improved the assessment of Slovenia from BBB+ to A-. The rating outlook is stable. According to STA, among the reasons for the revision of assessment in favour of the highest A category, the Fitch Agency noted positive trends in the area of public finance, banking sector and economy.

The Fitch representatives also indicated a reduction in the state budget deficit from 15% of GDP in 2013 to 2.9% of GDP in 2015. In the current year, the agency projected a decline to 2.3% of GDP, and in 2018 — down to 1.6% of GDP.

The Fitch Agency expects that the public debt will decline from 83.2% of GDP at the end of 2015 to 80.5% of GDP this year.

The effectiveness of further measures for balancing the public finances, an increase in the economy by about 4% and a continued period of low interest rates on the public debt of Slovenia can reduce the debt index down to 72% of GDP by 2022.

The Fitch estimates that the burden of debt may be also relieved by the incomes from the sale of state property and the involvement of large financial reserves. They now make up 16% of GDP or more than 6 billion euros. However, the public debt of Slovenia, according to the Agency, continues to be well above an average value of the credit rating of the A category countries.

The review of the credit rating was driven by improvements in the banking system. The liquidity of banks is high; the sources of funding are more stable than before the crisis; the share of weak loans, relative to the period of bank resolution at the end of 2013, decreased by more than half, although, according to the Fitch experts, it still remains high.

The volume of originated loans continuous declining. However, an increase in their number is planned for the next year. A consistently high external surplus and strengthening the share of exports influenced as a whole on the recovery of the national economy.

The Fitch experts note that the per capita gross domestic product index in Slovenia exceeds the average index of the A category countries. This also applies to the index of purchasing power among people.

According to the Agency, the stability of Slovenia is also caused by its presence in the euro zone.

The Fitch representatives believe that Slovenia’s GDP this year will increase by 1.9%. This figure is lower than the last estimate made by the experts of the Institute of Macroeconomic Analysis and Development of the Republic of Slovenia. In coming years, the Slovenian GDP growth will amount to slightly more than 2%.

The Fitch was the last of the three major credit agencies, which improved their assessment of Slovenia after several cuts during the crisis period. The Moody’s Agency was the first to do it in January this year. It raised its estimate from Ba1 to Baa3 and recently has changed its forecasts to the positive ones. In June, the Standard & Poor’s Agency followed this example. It raised the assessment of Slovenia by one level up — from A- to A — and noted the positive trends.