Fubotv earnings beat by $0.10, revenue topped estimates
Investing.com -- Fitch Ratings has confirmed Slovakia’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ’A-’ and maintains a Stable Outlook. This affirmation is backed by Slovakia’s EU and eurozone membership, which provides a relatively stable macroeconomic framework, steady EU capital inflows, a developed export sector and stable foreign direct investment. However, the rating is hindered by high deficits, increasing debt, medium-term growth constraints due to an ageing population, high exposure to the automotive sector, Germany and the US, and potential disruptions in energy supplies from Russia.
In 2024, Slovakia’s general government deficit expanded to 5.3% of GDP, up from 1.7% in 2022, driven by increased public wages, pensions, family support, healthcare and military spending. The 2024 deficit was lower than Fitch’s forecast and the government’s target of 5.8%, due to postponed military equipment deliveries. Fitch predicts that the fiscal deficit will stabilize in 2025 at 5.2%, as a result of the consolidation measures implemented at the start of the year.
In 2023, the government initiated consolidation measures and introduced more in 2025, amounting to 1.4% of GDP in net terms. These measures are part of a four-year fiscal plan intended to exit from the Excessive Deficit Procedure. They include raising VAT from 20% to 23%, introducing a financial transaction tax, increasing corporate income tax for large companies, halting the indexation of public wages and reforming social benefit programs. The authorities aim to stabilize the debt/GDP ratio and reduce the general government deficit to below 3% by 2028.
As part of its fiscal consolidation strategy, the government plans to introduce further measures totaling EUR1.7 billion (1.2% of GDP) for 2026 and up to EUR3.5 billion (2.4% of GDP) for 2027. These measures will likely be mainly expenditure cuts, although additional revenue measures, such as hikes in real estate and gambling taxes, may be considered. Fitch assumes these will be drafted and legislated in the second half of 2025.
Fitch anticipates a reduction in the fiscal deficit to 4.6% by 2026 and 3.2% by 2028. However, this forecast is higher than the government’s, reflecting risks associated with the 2027 electoral cycle and the governing coalition’s narrow majority. Additional risks to the fiscal consolidation strategy arise from geopolitical uncertainty, relatively high exposure to the effect of higher US tariffs and weaker growth in key trade partners like Germany.
Fitch projects Slovakia’s general government debt will rise to about 62% of GDP in 2026, up from 59.3% in 2024. The debt is expected to stabilize in 2028, at over 64%. The increase in debt reflects high primary deficits, including those due to increased military spending, and slower nominal GDP growth. We expect interest payments to rise to 4% of revenues in 2026, in line with the ’A’ median.
Slovakia is one of the most exposed central and Eastern European sovereigns to the automotive sector and US tariffs. Approximately 10% of Slovakia’s GDP and 40% of goods exports originate from the automotive industry. The US accounts for 4% of goods exports, primarily comprising automobiles. A three-year extension of the trade war could reduce Slovakia’s GDP by nearly 3pp and exports by EUR5 billion, and result in the loss of 20,000 jobs, according to the central bank.
Slovakia’s GDP grew by 2.1% in 2024. Fitch has revised down its growth forecast due to weaker external demand, exposure to the US and the auto industry, as well as fiscal consolidation. We now expect growth at 1.7% for both 2025 and 2026. Nevertheless, growth will be supported by household and government consumption, a gradual recovery in external demand, supply-side effects from new auto industry investments, lower interest rates and higher absorption of Recovery and Resilience Facility funds.
Inflation declined to 2.5% year on year in the second quarter of 2024, before rising again to 4.2% year on year in the first quarter of 2025, mostly driven by higher VAT. Fitch projects average inflation at 4.3% in 2025 and 3.6% in 2026.
The current account deficit rose to 2.7% of GDP in 2024, driven by weaker external demand. Fitch projects Slovakia’s current account deficit will widen further, to 3.7% and 3.8% in 2025 and 2026, respectively.
Regarding ESG - Governance, Slovakia has a high ESG Relevance Score (RS) of ’5[+]’ for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption.
The rating could be negatively impacted if there is a failure to consolidate public finances that leads to a significant and persistent increase in general government debt/GDP, or materially lower medium-term growth prospects. A significant improvement in the medium-term growth outlook, due to rising productivity growth, diversification of the economy or improvements in governance, could lead to a positive rating action.
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