Moody’s Sees ‘Minor’ Overshoot of Slovak 2013 Budget Goal

Moody’s Investors Service said it expects a “minor slippage” in Slovakia’s budget-deficit target for this year as economic growth slows.

The ratings company projects the shortfall will reach 3.1 percent of gross domestic product, 0.2 percentage point more than the government’s target, Moody’s said in an e-mailed note from New York late yesterday. Economic growth is forecast to slow to 0.9 percent from 2 percent in 2012, before accelerating to 2.8 percent in 2014.

The eastern euro-area country is coping with slowing export demand from its western peers, which is hurting tax revenue. Still, measures undertaken by the government should next year allow an exit from the European Union’s Excessive Deficit Procedure even as the fiscal shortfall is set to just exceed the 3 percent of GDP limit, Moody’s said.

Moody’s rates Slovakia at A2, on par with Poland and one grade below the Czech Republic. The assessment may be raised once the government debt, projected to peak just below 57 percent of GDP in 2014, decreases in a sustainable way, Moody’s said. On the other hand, the country may face downgrade pressure should prospects for economic growth “significantly” deteriorate, the ratings company said.

Slovak 10-year borrowing costs fell 1.1 basis point 2.385 percent, matching the yield for Belgium, whose rating is two levels better at Aa3.

Before it's here, it's on the Bloomberg Terminal.