Fitch Ratings upgrades Lithuania and Greece, affirms Azerbaijan and Slovenia

12 February 2020 — Cosmin CONCEATU
In January 2020, Fitch Ratings, a leading provider of credit ratings, took rating actions over Lithuania, Greece, Azerbaijan and Slovenia, upgrading the first two countries' ratings and affirming the others' Long-Term Foreign-Currency Issuer Default Rating (IDR).


Azerbaijan affirmed at 'BB+', Outlook Stable

The decision of affirming the IDR to 'BB+' was supported by multiple factors, including:
  • 2019 increasing fiscal surplus estimated to 6.0% of GDP,
  • resilient oil price and gas production,
  • restricting consolidated expenditure growth to 3% in real instead of nominal terms,
  • gross general government debt at 18.9% of GDP in 2019 (vs. 'BB' average of 46.5%),
  • accelerated real GDP growth of 2.4% in 2019 (vs. 1.4% in 2018) and
  • 2.6% average inflation during 2019, sitting in the lower bound of 4 plus or minus 2% target band
- full press release


Greece upgraded to 'BB', Outlook Positive

Fitch Ratings upgraded Greece's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BB' from 'BB-' with a Positive Outlook. The decision was influenced by several factors, including:
  • improving general government debt sustainability,
  • government's policy agenda, aimed at improving the business climate and attracting private investment,
  • estimated general government primary surplus of 4% of GDP in 2019, above the 3.5% target, 2019 being the 4th consecutive year in which Greece has outperformed targets agreed with EU creditors,
  • general government debt set to further decline from 181.2% of GDP in 2018 to 161% by 2021, debt servicing costs being low (94% of general government debt is at fixed interest rates, which implies low sensitivity to interest-rate shocks),
  • GDP growth in 2019 increased to 2.2% from 1.9% in 2018 against the backdrop of a weakening external environment, Fitch Ratings expecting a real GDP growth of 2.5 in 2020 and
  • high cash reserves at EUR 27 billion (~14.5% of GDP) able to cover Greece's gross financing requirement well beyond 2021, providing a significant backstop against refinancing risk
- full press release


Lithuania upgraded to 'A', Outlook Stable

Fitch Ratings upgraded Lithuania's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'A' from 'A-'. The Outlook is Stable. Some of the macroeconomic qualities that led to this decision were:
  • solid real GDP growth, which brought GDP per capita at market exchange rates close to 90% of the current 'A' median (from 68% in 2014),
  • general government debt (net of pre-funding requirements) estimated to have fallen to 33.8% of GDP at end-2019,
  • increased confidence in Lithuania's policy framework, characterized by prudent fiscal policy and eurozone membership,
  • net external debtor statute, debt estimated at 9.5% of GDP in 2019 and having an estimated negative net international position of -26.4% of GDP in 2019 (on a fast improving trend),
  • expected fiscal surplus for 2019 of 0.1% of GDP (compared with the 'A' median deficit of -1.2%), in line with government estimates,
  • positive net migration in 2019, the first time since at least 1991, which contributed to an overall population increase (month-on-month) starting in May 2019,
  • highly profitable and well-capitalised banking sector, but also highly concentrated
- full press release


Slovenia affirmed at 'A', Outlook Stable

Fitch Ratings affirmed Slovenia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'A' with a Stable Outlook. A few of the drivers that led to this decision were:
  • GDP per capita levels and governance indicators above the 'A' median,
  • European Commission Ageing Report's baseline scenario indicates that Slovenia will face an increase in age-related public spending of 6.9% GDP to 28.8% GDP between 2016-2050, the highest increase in percentage points of GDP among all EU members,
  • estimated real GDP growth of 2.5% in 2019, possibly remaining at the same level in 2020, going up to 2.7% in 2021,
  • account surplus remained broadly stable in 2019, despite a smaller trade surplus, at 5.8% of GDP, with projections of 5% for the next two years (above 1.3% 'A' median),
  • net external debt of 8.6% GDP in 2018, Fitch Ratings' projections being consistent with Slovenia becoming a net external creditor in 2020,
  • non-performing exposures declined to 3.4% in 3Q19, from 5.8% a year earlier (but higher than the EU-wide average of 2.5%), Slovenian banks' overall capital ratio being in line with the EU average at 18.9% in 3Q19
- full press release


Visit fitchratings.com for more information, methodology and rating criteria.
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