Slovakia’s credit rating affirmed at ’A-’ with stable outlook

Investing.com -- Fitch Ratings has maintained Slovakia’s Long-Term Foreign-Currency Issuer Default Rating at ’A-’ with a Stable Outlook, according to a statement released Friday.

The rating agency cited Slovakia’s EU and eurozone memberships as key supporting factors, which provide a stable macroeconomic framework and steady capital inflows, along with the country’s developed export sector.

However, Fitch noted several constraints on Slovakia’s rating, including high fiscal deficits, rising government debt, medium-term growth limitations due to an aging population, and significant exposure to the automotive sector, Germany, and the United States. The country’s continued reliance on Russian energy imports was also highlighted as a concern.

Slovakia’s general government deficit widened to 5.5% of GDP in 2024, up from 5.3% in 2023 and 1.6% in 2022, driven by increased spending on public wages, pensions, family support, healthcare, and military. Fitch projects the deficit will decrease to 5.1% in 2025, compared to the ’A’ median of 2.9%.

The government has implemented its third fiscal consolidation package in three years, worth 1.4% of GDP, despite political opposition. The measures include increased healthcare contributions, higher personal income tax progressivity, and efforts to combat tax evasion, along with expenditure cuts to ministries and local governments.

Fitch forecasts Slovakia’s government debt will rise to 65.5% of GDP by 2027, exceeding the ’A’ median of 55.5%, before stabilizing around 66% by 2029. The country’s long average debt maturity of over eight years will help moderate the impact of rising refinancing costs.

Economic growth has slowed, with GDP expanding by 1.9% in 2024, down from 2.2% in 2023, and further moderating to 0.7% year-over-year in the first half of 2025. Fitch has revised its growth forecast downward to 0.7% for 2025 and 1.1% for 2026, below the ’A’ medians of 2.4% and 2.2%, respectively.

Slovakia faces significant exposure to potential US tariffs, with the automotive sector accounting for about 7% of GDP in 2024 and approximately 40% of goods exports. While direct exports to the US comprise only 4% of Slovakia’s goods exports, indirect exposure through partners like Germany is likely higher.

Inflation has temporarily increased, with HICP inflation rising to 4.5% year-over-year in the third quarter of 2025, largely due to higher VAT rates, before easing to 3.8% in October. Fitch projects average inflation of 4.3% in 2025 and 4.0% in 2026, above the ’A’ median.

The current account deficit increased to 4.6% of GDP in 2024 and is projected to widen further to 4.9% in 2025 and 2026, before moderating to 4.3% in 2027 as new automotive capacity comes online.

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