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Slovenia Business Week no. 29/2005: S&P Keeps Slovenia's Credit Rating Firm

Standards & Poor's, the credit rating firm, has kept the credit risk rating for Slovenia for long-term exposure at AA for domestic currency and AA- for foreign currency

Standards & Poor's, the credit rating firm, has kept the credit risk rating for Slovenia for long-term exposure at AA for domestic currency and AA- for foreign currency. Short-term exposure in domestic as well as foreign currency was kept at A-1+, with both types of risk assessed as having a stable outlook, the Economics Ministry has said.

Slovenia's rating is constrained by the relatively low per capita GDP, which is to top US$ 18,863 this year and is less than half of the average of countries rated with AA, the agency has said.

Moreover, the country's progress to a higher grade is being hampered by slow privatisation and low level of foreign direct investment, S&P is quoted as saying.

According to S&P, the assessment reflects the judgement that the potential benefits of eurozone entry are balanced with an increased need for conservative fiscal policies in the eurozone.

The assessment is further underpinned with a well-diversified economy and stable political institutions.

S&P expects that the general government deficit will reach 1.8% of GDP this year and remain level over the medium term.

Although the rating firm expects that Slovenia will meet the criteria for eurozone entry, it notes that curbing inflation remains a challenge.

To achieve the monetary objectives, cooperation between the central bank and the government must be improved.

This is crucial in the light of the government's commitments to raise pensions, which could add 1% of GDP to public spending by 2010, S&P notes.

Source: Slovene Press Agency STA

Author: STA