Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the cases 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 the Republic of Austria (long-term local- and foreign-currency issuer and senior unsecured debt ratings: AAA/Negative; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 4 December 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 rating history can be found on www.scoperatings.com.

Key rating factors

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 a comparatively-elevated public debt stock.

The ratings are constrained by: i) a high public debt stock relative to highly-rated peers; ii) sensitivity to geopolitical event risk given the high reliance on Russian energy imports, although near-term energy supply risks are mitigated by Austria’s sizeable natural gas stocks, including a strategic gas reserve of 20 TWh and covering annual consumption as of 5 December 2023; and iii) long-term spending pressures arising from high pension and healthcare costs and an ageing society, which also weighs on growth prospects in the absence of structural reform.

Economic momentum decelerated sharply this year, in a context of elevated inflation, tighter funding conditions and weak external demand. Scope expects the Austrian economy to shrink by 0.4% this year, after robust growth of 4.8% in 2022. Output growth should only partially recover to 0.8% in 2024, in line with expectations of improving real incomes and private demand thanks to decelerating price pressures as well as of a more favourable external environment, although private investment dynamics are expected to remain subdued.

Scope expects the general government deficit to narrow to 2.5% of GDP this year, from 3.5% of GDP in 2022, thanks to lower spending on energy and Covid-19 support measures and robust tax revenue growth, supported by high inflation. It should remain broadly stable next year, at 2.4% of GDP, amid decelerating tax revenue growth and spending pressures from the impact of price-indexation on social, personnel and pension expenditures. Scope projects the general government debt-to-GDP ratio to decline only moderately to 76.2% by YE 2024, from 78.4% at YE 2022.

The Negative Outlook represents Scope’s view that risks to the ratings are tilted to the downside.

The ratings could be downgraded if, individually or collectively: i) the growth outlook remained weak, due to, for example, heightened uncertainty around gas imports from Russia and/or a relative loss of international competitiveness; ii) the fiscal outlook remained pressured, with the general government debt-to-GDP ratio deviating from a firm downward trend; and/or iii) risks in the banking sector re-emerged, increasing financial stability concerns and possibly creating the need for government intervention.

Conversely, the Outlook could be revised to Stable if, individually or collectively: i) the growth outlook improved substantially, including via an acceleration of reducing dependence on gas imports from Russia; and/or ii) the fiscal outlook improved, leading to a faster-than-anticipated reduction in the general government debt-to-GDP ratio, for example via narrower general government deficits.

For the updated rating report accompanying this review, click here. 

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 27 September 2023) 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, Associate Director

© 2023 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin.