Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.
 
Scope completed the monitoring review for Republic of Austria (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AAA/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 31 January 2023.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated ratings history can be found on www.scoperatings.com.

Key rating factors

For the updated Rating Report accompanying this review, click here.

Austria’s AAA ratings reflect: i) a wealthy, resilient and diversified economy; ii) a strong external position with low private sector indebtedness; iii) a sound banking sector; and iv) a favourable public debt profile with low financing costs and a long average maturity, mitigating risks from an elevated public debt stock and aiding medium-term fiscal consolidation.

The rating are constrained by: i) a high public debt stock relative to highly-rated peer levels; and ii) long-term spending pressures arising from high pension and healthcare costs and an ageing society, which also weigh on growth prospects in the absence of structural reforms.

Due to repercussions of Russia’s war in Ukraine, Scope expects real economic growth to slow significantly to 0.6% this year, after 4.7% in 2022. In 2024, ongoing diversification of gas sources, a robust labour market and economic recovery of trading partners, supporting external demand, should contribute to growth returning to around 1.5%. The general government budget deficit is forecast to decline this year to 2.2% of GDP, down from an estimated 3.2% of GDP in 2022. Longer-run, the deficit should stabilise at around 2.0% of GDP, partly due to the government’s eco-social reform lowering private income tax revenue, and the indexation of social benefits to inflation, which is projected to stay well above 2% in 2023/24.

The Stable Outlook reflects Scope’s view that the risks Austria faces over the next 12 to 18 months are well balanced.

The ratings/Outlooks could be downgraded if, individually or collectively: i) growth prospects weakened substantially due, for example, to a decline in international competitiveness; ii) the fiscal outlook worsened materially; and/or iii) risks in the banking sector re-emerged, increasing financial stability concerns and possibly creating the need for government intervention.

The methodology applicable for the reviewed rating(s) and/or rating Outlook(s) (Sovereign Ratings, 27 September 2022) is available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst: Julian Zimmermann, Senior Analyst.

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