A credit rating is an important guide for investors, as it shows them the likelihood of properly repaying loans. It has a significant effect on the willingness of creditors to lend to the State or another entity concerned, as well as on the terms of the loan, such as the interest rate. The higher the rating, the better the borrower is perceived in the eyes of creditors and the more likely he is to be able to secure cheaper loans.
Fitch explains his unchanged assessment for the Czechia in a press release on Friday, among other things, “by returning to stable economic growth, which is supported by vaccination and pandemic control.” Despite the unexpectedly “expansive” short-term tax policy, the agency expects the Czech authorities to return the government debt ratio to a “downward trajectory” in the medium term.
“The Czechia thus shows the same degree of reliability of its debt as Belgium, the United Kingdom or Estonia, which is the least indebted EU country,” commented Lukáš Kovanda, an analyst at Trinity Bank.
He adds that Fitch is even more optimistic than the current Czech government itself in its current April Convergence Program, a key forward-looking economic document. The Cabinet expects higher levels of public debt-to-GDP ratio in the future than the Agency.
The risk is a longer period of volatile budgetary policy
According to Kovanda Fitch, he sees possible longer periods of unbridled budgetary policy and failure to meet the challenges “resulting from a strong dependence on a technologically and regulatory rapidly changing automotive industry” as scenarios in which there would be a risk of a downgrade.
In the ranking of three world-renowned rating agencies – in addition to Fitch Ratings, Moody’s and Standard & Poor’s – the Czechia thus remains the best-rated country of all the states of the former Soviet bloc. According to Kovanda, the mentioned Estonia is rated worse than the Czechia by the Moody’s agency.
– .
