S&P affirms Slovak rating, changes outlook to negative

On Friday evening, S&P revised Slovakia's outlook to negative while affirming its A+ sovereign credit rating. The outlook deteriorated due to global trade tensions affecting Slovakia's automotive-heavy industry, potentially damaging fiscal consolidation efforts and increasing its debt ratio. S&P now projects the Slovak economy to grow by only 1.6% in 2025 and 1.3% in 2026. Despite a sluggish external environment, EU-funded investments and Germany's fiscal stimulus are expected to provide some support. This rationale aligns with our assumptions, although we see slightly higher growth at 1.8% and 1.5% for this year and next, respectively. S&P also reviewed the government's consolidation efforts, acknowledging the substantial measures in 2025 and anticipating a similar package for 2026, which should reduce the deficit to around 3%-4% of GDP by 2027. The adverse scenario, leading to a downgrade, involves lower-than-expected growth affecting deficit and debt levels. Conversely, better adaptation to structural challenges and improved governance could lead to a neutral outlook revision.