RTTNews - Fitch Ratings on Tuesday affirmed the Czech Republic's long-term foreign currency Issuer Default Rating at 'A+' and the long-term local currency IDR at 'AA minus', with stable outlooks. The firm also confirmed the short-term local currency IDR at 'F1' and the Country Ceiling at 'AA+'.
Fitch said the Czech Republic would contract this year, by 3%, after a 3.2% growth in 2008. At the same time, the economy is expected to grow 0.5% next year, subject to economic recovery in the euro area. Risks to the short-term growth outlook are weighted to the downside, and are particularly sensitive to the growth outlook in Germany, the Czech Republic's largest trading partner and principal source of foreign investment, Fitch said.
Meanwhile, the firm forecasts a sharp widening of the general government deficit, owing to government expenditure on stimulus measures, with the deficit expected to rise to 5% of GDP this year after standing at 1.4% last year. However, public finances were relatively stronger, standing at 29.9% of GDP last year compared to the 37% median level of the 'A' rated peers.
At the same time, the firm said, A key risk to sovereign creditworthiness would be the failure to narrow the deficit over the medium term and a rise in government debt levels that was inconsistent with that of peers would place downward pressure on the Czech Republic's Sovereign IDRs.
Fitch pointed out that the country external position remained strong, but expects the current account deficit to moderately increase to 3.5% of GDP this year compared to 3.1% last year.
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