Morningstar DBRS upgrades Slovenia's credit rating

SLOVENIA, November 22 - Slovenia’s upgraded credit rating to AA (low) reflects Morningstar DBRS’s opinion that the recently adopted structural reforms will improve fiscal sustainability in the medium term and that the country’s macroeconomic foundations are sound. Over the next five years, economic growth is expected to average 2.4%, while the medium-term fiscal deficit is expected to remain below 3% of gross domestic product (GDP). Slovenia’s moderate fiscal deficit and strong economic growth are expected to stabilise the country’s debt-to-GDP ratio at 60–70%.

According to Morningstar DBRS, the key factors for the upgraded credit rating are improvements made in the areas of fiscal management, the balance of payments, and debt and liquidity. The agency highlighted Slovenia’s prudent fiscal policy and effective debt management.

The stable forecast of the S&P credit rating reflects the agency’s expectations that the Slovenian economy and public finances in the next two years will continue to be resistant to external shocks. S&P stressed that recent structural reforms, including the pension reform, have made good progress in recent years, adding that Slovenia has significant external buffers, mainly repeated surpluses on the current account of the balance of payments, as well as a favourable level of external debt.

In the following years, the agency anticipates domestic demand to support the average real economic growth, which will be slightly below 2%. Domestic demand is expected to increase due to the flexible labour market and strong real wage growth. At the same time, public investments will remain significant because of post-flood recovery works and projects under the Recovery and Resilience Plan. The government deficit will achieve an average 2.3% of GDP in the 2025–2028 period, but the reduction in previously created cash reserves will enable the Government to continue decreasing the gross debt-GDP ratio.