SLOVENIA

In the most recent semi-annual review on June 19, 2015, Standard & Poor's Ratings Services revised the outlook on its 'A-' long-term credit rating for the Republic of Slovenia to positive.

Such revision reflects our opinion that the ongoing economic recovery in Slovenia will broaden further, benefiting fiscal outcomes. We believe that Slovenia's real GDP will likely rise on average by about 2.1% per year during 2015-2018,with the drivers of economic growth gradually shifting towards domestic demand. The consequently more tax-rich growth is also likely to bode well for public finances. We expect gross general government debt to peak in 2016.

The prospect for investment depends on an improvement in credit conditions, which so far has been absent. We continue to view credit conditions as tight, reflecting Slovenia's challenged monetary transmission mechanism, despite the expansionary monetary policy stance by the European Central Bank (ECB).

We believe that the implementation of growth-enhancing structural reforms, including in judicial and administrative areas, could further boost Slovenia's longer-term economic growth prospects. Although we consider that policy risks in Slovenia have receded since 2013, long-entrenched political patronage and weak--albeit gradually improving--institutional and corporate governance could hamper the pace and effectiveness of the abovementioned reforms, due to vested interests of incumbents in these sectors.

The positive outlook reflects a one-in-three probability of an upgrade over the next 24 months if the economic recovery broadens, and, combined with structural reforms, results in improved fiscal and debt metrics. We could revise the outlook to stable if economic growth is lower than we anticipate, damaging the policy cohesiveness of the government coalition, or if fiscal outcomes are markedly worse than our current expectations.

SLOVAK REPUBLIC

On July 31, 2015, Standard & Poor's Ratings Services raised its long-term credit ratings on the Slovak Republic to 'A+' from 'A'.

The upgrade reflects our view of Slovakia's accelerating growth momentum, which we expect will lead to continued improvement in the country's fiscal metrics, especially a gradually decreasing public debt burden and a lower interest burden, over our 2015-2018 forecast horizon. The rating is supported by Slovakia's low external indebtedness, strong growth, and improving fiscal metrics. The rating is constrained by persisting structural challenges to the Slovak economy, such as high structural and youth unemployment, as well as wide regional disparities. Although we assess policymaking in Slovakia as generally effective, we view its political institutions, and the checks and balances between them, as evolving.

We anticipate that general government debt will remain below 52% of GDP in 2015 and the government's interest burden will decrease over 2015-2018, aided by a decreasing debt stock and lower interest rates. Slovakia's mostly foreign-owned and deposit-funded banking system remains well capitalized, with nonperforming loans amounting to just over 5% of total loans.

The outlook on Slovakia is stable, reflecting our expectation that the government will continue to consolidate public finances and that growth will remain strong, supported by domestic demand. We could raise the long-term rating if Slovakia's fiscal consolidation leads to a significant and sustained improvement in its fiscal metrics beyond our current assumptions without resorting to one-off or non-orthodox policy measures.

We could lower the rating on Slovakia if fiscal metrics deteriorated relative to our baseline scenario, possibly as a result of higher-than-expected pre-election spending. Moreover, if the recovery in the eurozone were to be weaker-than expected, putting a significant drag on Slovakia's growth prospects, the rating could also come under pressure. Lastly, a negative reassessment of Slovakia's institutional strength could weigh negatively on our rating.

HUNGARY

On Sept. 18, 2015, Standard & Poor's Ratings Services affirmed its 'BB+' long-term credit rating on Hungary with a stable outlook.

The rating on Hungary reflects our assessment of its comparatively advanced economy, skilled labor force, and relatively well-diversified export structures. The rating remains constrained B what we consider to be a less predictable policymaking environment and still-high general government indebtedness.

The effect on disposable incomes of lower oil and gas prices, rising employment, a freeing up of households' precautionary savings as a result of the conversion of foreign currency-denominated mortgages into local currency, and lower debt servicing have all helped to strengthen household consumption. At 6.8%, the unemployment rate is the lowest it has been in a decade. We anticipate that a continuation of fiscal and monetary stimuli will support domestic demand and the Hungarian economy will grow by 2.4% on average in real terms between 2015 and 2018.

Since 2009, external deleveraging in the private sector has been considerable, thanks to the current account surplus Hungary has now operated for five consecutive years. We consider Hungary's competitiveness metrics to be strong and considerably less vulnerability to a potential rise in U.S. interest rates.

For 2015, we project that the government will come close to meeting its general government deficit target of 2.4% of GDP, but debt continue to climb as the government has prioritized its acquisition of utilities and banks over accelerating debt reduction.

The stable outlook balances our assessment of Hungary's stabilizing economy and relatively steady headline fiscal performance against its still-high general government indebtedness and generally less-predictable policymaking. We could raise the ratings if the government pursued policies that encourage investment and promote sustainable growth, such that risks to its balance sheet and Hungary's monetary conditions eased.

Conversely, we could lower the ratings if Hungary's public finances weakened materially, most likely through an increase in quasi-fiscal activity, or if external vulnerabilities once again built up.

                                                                                                                                                                                                                                                 

	Real GDP Growth (%)	Unemployment Rate (%)	CPI Growth (%)	GG Balance / GDP (%)	Net GG Debt / GDP (%)	Current Account Balance / GDP (%)	Net Narrow External Debt / CARs (%)
Slovenia
2014	2.64	9.70	0.37	(4.88)	71.28	5.77	72.01
2015	2.40	9.40	0.10	(2.90)	71.75	6.37	75.62
2016	2.00	9.20	1.20	(2.50)	72.63	6.31	74.77
Slovakia
2014	2.41	13.20	(0.10)	(2.87)	47.76	0.05	38.97
2015	3.00	12.50	0.20	(2.70)	48.27	0.35	44.51
2016	3.30	12.00	1.30	(2.50)	48.45	0.61	43.80
Hungary
2014	3.58	7.70	0.02	(2.57)	72.88	3.97	41.27
2015	3.00	6.80	(0.30)	(2.60)	71.63	4.59	42.05
2016	2.40	6.00	0.00	(2.40)	70.51	4.86	36.31

Sources: Standard & Poor's Rating Services and Eurostat.

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