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Moody's lifts Czech Republic ratings, revises outlook

Moody's on Oct. 4 upgraded the Czech Republic's long-term issuer and senior unsecured debt ratings to Aa3 from A1 and revised the outlook to stable from positive.

The ratings actions reflect further improvements in the country's fiscal strength metrics, which are now in line with the median for similarly Aa3-rated peers even under an adverse scenario. Government reforms aimed at supporting innovation across sectors and boosting the share of value-added in the industry have helped support the European nation's economic strength, Moody's noted, adding that it expects the Czech government's debt burden to reach 30.8% of GDP by 2020-end and drop below 30% of GDP by 2023.

Moreover, the stable outlook balances the core strengths of the Czech Republic's economic structure and robust institutional framework with the key credit challenges that mainly relate to the negative impact of an ageing population on the country's long-term fiscal stability and government debt sustainability.

The related short-term rating was affirmed at (P)P-1. Moody's also changed the Czech Republic's long-term foreign-currency bond ceiling to Aa1 from Aa2, its long-term foreign-currency deposit ceiling to Aa3 from A, and its long-term local-currency country ceilings for bonds and deposits to Aa1 from Aa2. The short-term ceilings for foreign-currency bonds and bank deposits were unchanged at P-1.