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Moody's maintains Slovakia's rating at A2 with negative outlook

Last update: 31.05.2023 13:00

In its latest report, Moody's confirmed Slovakia's A2 rating with a negative outlook. The rating reflects the country's high dependence on gas imports, geopolitical risks in the context of Russia's invasion of Ukraine, as well as concerns about the rule of law and the fight against corruption. These risks are partly offset by economic growth, euro area membership and the country's moderate indebtedness.

Challenges Slovakia faces include high dependence on gas imports against the backdrop of a likely tense situation on European gas markets in 2023-2024, as well as institutional issues related to control of corruption and the rule of law. Another risk is Slovakia's demographic profile, which threatens the economy's potential growth and fiscal sustainability.

“Failure to respond to the increased structural deficit could be reflected in a downgrade in Slovakia's rating,” Moody's said in its assessment report, adding that despite a high degree of uncertainty about the future direction of policy, the agency believes that the Slovak government will engage in a consolidation process in line with national and European fiscal rules after the elections. 

The negative outlook reflects a high dependence on energy imports, a large industrial sector and a high degree of interconnectedness with the rest of the EU. A permanent reduction in gas supply has the potential to significantly weaken the country's economy, which in turn would negatively affect Slovakia's public finances, especially in combination with pre-existing structural problems such as an ageing population.

“The current Moody's report also shows that Slovakia needs a clear fiscal plan,” said Slovak Finance Minister Michal Horváth.

Slovakia's rating could deteriorate if the energy crisis were to affect the performance of the economy, which could also negatively affect the country's fiscal situation. The downgrade could also be preceded by an escalation of the Russian-Ukrainian military conflict.

Press Department
Ministry of Finance of the Slovak Republic