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2023/01/19 / Erste Group Research

CEE Special Report | Upcoming rating decisions

A couple of CEE countries had their outlook changed to negative over the last year. The energy shortages, the key risk for Czechia, Hungary and Slovakia did not materialize, becoming a neutral or even credit-positive factor. In the case of Czechia and Slovakia, it may, but does not have to, outweigh the risks stemming from pressure on public finance combined with political instability in Slovakia. For Hungary, however, unlocking EU funds will be a decisive factor in avoiding a downgrade.

We believe, however, that a change in outlook to negative by Fitch this Friday is a likely scenario. At the same time, we hope that a downgrade is still not in the cards. Having an open door for receiving funds from the RRF is a positive factor that may ward off the downgrade at this point. Just a week later, Hungary will be under the scrutiny of S&P. This rating agency changed the outlook to negative for Hungary in August 2022. At this point, we do not expect S&P to change the rating and to wait until there is more clarity regarding EU funds.

While the pressure on public finances remains a credit-negative factor for Czechia, reflecting uncertainty regarding structural fiscal imbalances over the medium term, the concerns over the impact of the energy crisis, and shutdown in gas supplies, did not materialize. In the upcoming evaluations, the way the energy crisis has been unfolding should thus become a more neutral factor in the rating assessment of Czechia and Slovakia. In Slovakia, the fall of the government, possibility of early elections in 2023, loose fiscal stance (high deficit, lack of consolidation strategy and structural reforms with looming early elections) come at a moment when all three rating agencies (S&P, Moody’s and Fitch) see Slovakia’s outlook as negative. The lack of political and fiscal stability is a negative factor when it comes to credibility assessment, given the negative outlook, making a downgrade a viable option.

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General information

AuthorErste Group Research
Product nameCEE Economies Special Report
Topic in focusFX, Macro/ Fixed income
Economy in focusCEE, Czech Republic, Hungary, Romania, Slovakia
Currency in focusCzech Koruna, Euro, Hungarian Forint, Romanian Leu
Sector in focus-


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