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: AA+/Stable; short-term local- and foreign-currency issuer ratings: S-1+/Stable) on 4 October 2024.

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.

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

Key rating factors

Austria’s AA+ 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 very resilient structure of public debt 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 other highly-rated peers; ii) budgetary pressures, with rising pension and healthcare costs and an ageing society, which also weighs on growth prospects in the absence of structural reforms; and iii) some sensitivity to geopolitical risks given the remaining reliance on Russian natural gas imports, although diversification efforts, high storage levels and demand reductions significantly reduce any remaining exposure.

Austria’s credit ratings are anchored by the economy’s resilience to external shocks benefitting from a wealthy and diversified economy. However, the Austrian economy remains in a recession. After a contraction of real GDP of 1% in 2023, Scope expects a further decline of 0.4% in 2024 given subdued external demand, investment activity and private demand. Real GDP growth should partially recover to 1.1% in 2025.

Finally, Scope expects budgetary pressures to persist, with a projected general government deficit of 3.3% of GDP for 2024, up from 2.6% of GDP in 2023. The rising projected deficit for 2024 is driven by a broad-based increase in spending, including on pensions, climate and energy and intergovernmental fiscal relations, and only moderate growth in revenue. The debt-to-GDP ratio is expected to gradually increase in coming years, from 78.6% at the end of 2023 to around 82% by 2029. Austria’s credit profile continues to benefit from a very resilient structure of public debt, including an exceptionally long average maturity (11.83 years as of end-August) and a high share of fixed-rate debt (over 90% of total).

The Stable Outlook represents Scope’s view that risks to the ratings are balanced.

The ratings could be downgraded if, individually or collectively: i) the fiscal outlook worsened, leading to a rising debt-to-GDP ratio; ii) the growth outlook weakened, for example, due to losses in international competitiveness; and/or iii) financial stability risks emerged, with significant negative implications for the economic and/or public finance outlook.

Conversely, the ratings could be upgraded if, individually or collectively: i) the fiscal outlook improved materially, for example, via structural improvements in the government budget balance and a steady decline in the debt-to-GDP ratio; ii) medium-term growth prospects strengthened substantially.

The methodology applicable for the reviewed ratings and/or rating Outlooks (Sovereign Rating Methodology, 29 January 2024) 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

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