Fitch Ratings Affirms Czechia At AA-

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International rating agency Fitch Ratings confirmed AA- rated creditworthiness of the Czech Republic. The rating outlook is stable, indicating that the Agency is not going to change the rating in the foreseeable future.

According to the agency, the stable outlook reflects expectations that authorities will continue to pursue a relatively sound budgetary and monetary policy in the context of weaker external demand, which could have a negative impact on the open Czech economy.

Fitch expects the Czech Republic’s gross domestic product (GDP) growth to slow to 2.2 percent this year from 2.5 percent expected last year. Next year, the agency expects a further slowdown in economic growth, to 2.1 percent.
According to Fitch, consumer price inflation is expected to reach 2.5 percent on average this year. It should slow to two percent next year. The agency also expects the Czech National Bank (CNB) to leave its basic interest rate at two percent this year. Fitch could cut interest rates next year if economic growth lagged behind expectations.

A credit rating is an important guide for investors, as it shows them the likelihood of proper loan repayment. It has a significant impact on the creditors’ willingness to lend to the State or other entity concerned, as well as on the terms of the loan, such as the interest rate. The higher the rating, the better I perceive the borrower in the eyes of creditors and the more likely it is to be able to secure cheaper loans.