Scope Ratings reviews its ratings either yearly, or at least every six months in the case of sovereigns, sub-sovereigns and supranational organisations. Monitoring reviews are unrelated to the calendar that outlines public finance rating actions.

Scope performs monitoring reviews to determine whether outstanding ratings remain proportionate. Monitoring reviews are conducted either by performing a portfolio review in terms of the applicable methodology/ies, latest developments, and the rated entity’s financial and operational aspects relative to similarly-rated peers; or through targeted reviews on an individual credit. Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Slovakia (A+/Negative; S-1+/Negative) on 21 June 2021. This monitoring note does not constitute a rating action nor does it indicate the likelihood of a credit rating action in the short term. The latest information on the credit ratings in this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

Slovakia’s A+ rating is underpinned by i) a track record of credible macroeconomic policies, supported by the country’s EU and euro area memberships, the latter conferring advantages via a strong reserve currency and eligibility to the asset purchase facilities of the European Central Bank; ii) still moderate levels of general government debt, supported by a credible constitutional budgetary framework; and iii) solid economic fundamentals and a competitive export-oriented industrial base, anchored by FDI inflows.

The Negative Outlook reflects Scope’s view that risks to the ratings are tilted to the downside over the next 12 to 18 months. The Negative Outlook reflects: i) the deterioration in Slovakia’s fiscal dynamics, exacerbated by a sharp widening in budget deficits due to higher spending needs in the near-term due to the coronavirus shock; and ii) Slovakia’s external vulnerabilities, stemming from the economy’s high exposure to international value chains and relatively high reliance on its car industry, the latter subject to potential risks from structural changes to the sector.

The ratings could be downgraded if, individually or collectively: i) Scope observes materially higher debt ratios than currently projected due, for example, to a slower-than-expected recovery and/or greater-than-anticipated fiscal loosening; ii) net external debtor position widens materially due, for example, to sustained weak external demand; and/or iii) there is an increasing exposure to limited diversification undermining growth and public finance outlooks.

Conversely, the rating Outlook could be revised back to Stable if, individually or collectively: i) the government’s fiscal consolidation agenda increases Scope’s confidence in a steady downward trajectory for the general government debt ratio; ii) there is a sustained stronger-than-anticipated economic growth in the period ahead without a substantial increase in macroeconomic imbalances; and/or iii) implementation of structural reforms improves longer-term growth potential.

For the updated scorecards accompanying this review, click here.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Ratings, 9 October 2020) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Levon Kameryan, Senior Analyst

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