The Slovenia Times

Fitch affirms Slovenia's A rating with positive outlook


"Slovenia's ratings are supported by high governance and human development indicators and a credible policy framework supported by EU membership," Fitch said in a press release on Friday.

Moreover, the stable outlook reflects not only a level of resilience to the pandemic, but also "a track record of fiscal prudence. The latter provides some confidence that wider fiscal deficits associated with the COVID-19 policy response will be unwound as the crisis recedes."

Fitch forecasts that the country's GDP will shrink by 7.1% this year, growing by 4.9% next year and another 3.3% in 2022, returning to a level slightly above that in 2019 in two years.

Fitch does not expect to see unemployment skyrocket, having grown by only 2.3 percentage points to 6.8% this year over last, still considerably lower than in the most recent financial crisis, when it exceeded 10%.

The agency moreover believes the country's public finance deficit will reach 7.8% of GDP this year due to the anti-coronacrisis measures, before starting to lower next year and reaching around 2% of GDP in 2022.

Fitch expects to see a rapid rise in public debt to 80.3% of GDP, adding the figure was close to "the record high reached in 2015 following the bail-out of domestic banks, and compares with the much lower current 'A' median for 2020 of 56.3% of GDP."

However, public debt should start to drop at an average of 2.5 percentage points a year between 2021 and 2024. The decrease is to be slower than the 4 percentage points per year in 2016-19.

Fitch says that the "financial sector is better positioned to weather the Covid-19 shock than during the global financial crisis of 2008-09, supported by a liquid and well capitalised banking system."

"Nevertheless, the widespread sectoral damage caused by the pandemic will lead to a gradual increase in loan delinquencies, even as forbearance measures mitigate the shock. Combined with a projected slowdown in credit growth, this will put pressure on bank profitability."

Fitch also says that Slovenia's government had been effective in "passing legislation in recent months, increasing the likelihood that it will remain in power until next elections in 2022."

In a response to the rating, the Finance Ministry said on Saturday that this proved yet again that Slovenia remained a stable and trustworthy country. It also noted that Fitch was the third agency in recent months to uphold its rating.


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