The Slovenia Times

Fitch: Slovenia Political Risk Reduced, Challenges Remain


Fitch's assumption remains that Slovenia will be able to avoid requesting international financial assistance, but the agency says that to maintain investor confidence, the new government will need to finalise and implement legislation on a bad bank and sovereign holding.

"Failure to tackle these issues in a timely manner would increase pressure on the 'A-' sovereign rating", the ratings agency cautioned on Friday.

Fitch notes that Prime Minister Alenka BratuĊĦek said on Wednesday her government would continue the bad bank and sovereign holding projects "with some changes" and that the Citizens' List had made its participation in the coalition conditional on the adoption of bad bank and sovereign holding measures.

"But it remains unclear what shape these measures will finally take, while bank asset quality continues to deteriorate, banks' capital buffers are thinning and implementation risks remain," Fitch underscores, noting that banking sector reforms have been prone to setbacks in the past.

The agency's assessment of Slovenia's sovereign rating will take into consideration the progress in implementing the relevant legislation, and other factors including fiscal and economic performance and market access.

Fitch is pessimistic about Slovenia's economy, projecting a 1.6% fall in GDP for the country this year.

"Rising non-performing loans and a weak economic outlook make bank recapitalisation all the more urgent," the agency says.


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