After 17 years, Moody’s upgrades Czech Republic’s rating

BBJ

Moody’s Investors Service has raised the Czech Republic’s credit rating by one notch, citing a strong budget performance and low debt as key reasons for the country’s first upgrade in 17 years, news wire Bloomberg and Czech Radio reported.

The long-term foreign debt rating was upgraded to ‘Aa3’, the fourth highest investment grade, from ‘A1’, bringing the Czech Republic on a par with Belgium and Taiwan.

The Czech Republic has been one of the best budget performers in the European Union, and its debt ratio of 32% of economic output is the fourth lowest in the bloc.

Growth has been slowing this year, but even with lower forecasts Moody’s expects the Czech debt burden to decline further this year and in 2020. The debt should fall below 30% of GDP by 2023, the rating agency said in a statement on Friday.

While both headline and structural budget balances are expected to turn into small deficits of less than 1% of GDP over the coming years, prudent fiscal policy should prevent a significant deterioration, according to Moody’s.

Both S&P Ratings and Fitch Ratings maintain a ‘AA-’ assessment on the Czech Republic.