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DBRS changes outlook on Slovenia's credit ratings to positive

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DBRS changes outlook on Slovenia's credit ratings to positive

DBRS expects to upgrade the Republic of Slovenia's credit ratings thanks to the country's "strong" performance on fiscal and debt metrics.

The rating agency currently rates Slovenia's long-term foreign and local currency issuer ratings at A, and short-term foreign and local currency issuer ratings at R-1 (low). The trend on all ratings has changed to positive, DBRS said.

The change in outlook follows "impressive" economic growth that has helped Slovenia repair its fiscal accounts and continue to rein in on its debt-to-GDP ratio over the years. Specifically, DBRS expects healthy fiscal surpluses in the coming years and general government debt to decline to under 62% of GDP in 2020 — a reduction of over 20 percentage points of GDP since 2015.

"Slovenia's credit strengths stem from its wealthy and high value-added economy compared to A category regional peers, its effective debt management and judicious fiscal framework, and its membership of European institutions," DBRS said.

The country is not without its challenges, however. DBRS said Slovenia's ratings are principally constrained by the small and open nature of its economy which is vulnerable to external shocks, and the country's stock of public sector debt which is still high. Despite the reduction in its liabilities, the government's debt remains above regional peers.

Long-run debt reduction could be challenged by rising age-related spending, and unfavorable demographic trends are expected to place structural pressure over the long-term on public expenditures in the absence of healthcare and pension reform, DBRS said.