The Slovenia Times

Fitch Upgrades Slovenia's Outlook from Stable to Positive


The revised outlook means Fitch could upgrade Slovenia's credit rating on the basis of shrinking budget deficit consistent with government debt on a downward path, progress in the clean-up of bank and corporate balance and a sustained economic recovery supported by structural reforms.

The agency expects the recently passed fiscal rule act to support structural budget tightening, so it expects the government deficit to drop to 2.5% of GDP by 2017 from 3% in 2015.

Fitch also expects government debt, which was sharply rising after 2008, to peak in 2015 at 81.8% of GDP before starting to slowly decline.

It moreover believes that proceeds from future privatisations could lead to further lowering of the debt.

The agency also noted that following government interventions, Slovenian banks' capacity to resist shocks has improved considerably.

However, non-performing loans are still high (over 11% in July), but down from a peak of over 17% in November 2013, reflecting transfers to the bad bank.

Capital ratios have also improved a lot, reaching 17.9% at the end of 2014, up from 11.4% in 2012, before the 2013 bank bailout.

As deleveraging continues, Fitch expects bank crediting of the private sector to contract by 2% in nominal terms this year before it stabilise next year.

Fitch analysts also noted that Slovenia's current account has switched to surplus from deficit due to stronger exports.

They expect it to remain above 5% of GDP in 2017 after reaching 7% in 2014 and recording an average deficit of 2.3% in 2005-2010.


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