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European Developed Sovereign Rating Trends 2020

Chart 1

image

Positive Outlooks Exceed Negative Ones

Strengthening competitiveness, solid economic growth, and reduced macroeconomic imbalances--supported by central banks' accommodative monetary stances--have improved European developed sovereigns' credit standings over the last few years. As a consequence, ratings have trended modestly upward, including in the Eurozone which underwent a significant economic and financial crisis in the first part of the previous decade.

We currently have a positive outlook balance, with four positive outlooks (Andorra, Greece, Malta, and Portugal) and one negative (Italy) among the 30 European developed sovereigns. The absolute level of European developed sovereign ratings remains, on average, two notches below the level before the 2008-2009 global financial crisis. Compared with 2007, there is now also a far wider ratings divergence, with 12 notches separating 'BB-' rated Greece from 'AAA' rated Denmark, Germany, Liechtenstein, Luxembourg, the Netherlands, Norway, and Sweden. This divergence reflects an array of institutional, external, budgetary, financial, and economic settings and prospects. Along with stronger economic growth, and reduced external and public finance imbalances, further economic and budgetary reforms would be positive for sovereign creditworthiness.

Such policies would, in our view, enable a sustained increase in economic growth, reinvigorate the current economic cycle, and help to contain risks stemming from significantly higher public or private debt burdens and related external vulnerabilities. Policies could include propping up domestic demand by fiscal policy easing in countries that can afford it, such as the Netherlands or Germany. However, large near-term fiscal stimulus appears unlikely in any sovereign with fiscal space, especially absent a negative shock that would undermine what are currently favorable labor market outcomes. Nevertheless, we expect some fiscal easing during 2020 in line with sovereigns' budget plans. Rather than near-term fiscal stimulus, we are more likely to see some sovereigns embarking on long-term investment strategies including more climate-related investments, as reflected in the budgetary plans of Netherlands and Belgium, for example. In this context, we are also likely to see more green bond issuance, including by the sovereigns that have so far not tapped the increasing demand in this segment (such as Germany, Spain, and Italy).

Chart 2

image

We currently forecast the eurozone to grow below potential, posting 1.0% GDP growth in 2020 and 1.2% in 2021 after 1.2% in 2019. Domestic demand will remain the key pillar of growth, while the outlook for external demand remains weak amid a slowing Chinese economy and still solid but decelerating U.S. growth. Investment spending is likely to weaken in the face of a more complicated external environment. Yet, while manufacturing activity still has to recover, growth in services remains strong enough to sustain further job creation. In the U.K., the large parliamentary majority secured by the Conservative Party in the December 2019 general elections means the country will now leave the EU in an orderly fashion at the end of January 2020; the transition period during which U.K. companies continue to have access to the single market is currently set to end on Dec. 31 of this year.

Chart 3

image

Global trade tensions, for example possible U.S. tariffs on European car exports, the slowing Chinese economy, or further uncertainty regarding the extension of the U.K.'s transition period could all weigh on growth. Other potential external shocks--including the risk that the new coronavirus becomes a global pandemic--could drag on growth in European services, not least tourism. If political and geopolitical risks materialize, European developed sovereigns' economic performance could be jeopardized, for example via an oil price shock. Protectionism and global security risks, exemplified by the recent escalation of tensions between the U.S. and Iran, could spill over into the eurozone and dampen growth.

In terms of sovereigns' borrowing conditions, we anticipate that the ongoing decline in the average interest rate on outstanding government debt is unlikely to reverse any time soon. The ECB relaunched its program of public asset purchases in November 2019, and accommodative monetary policy stances continue elsewhere. In Sweden, the central bank decided to move its policy rates from negative territory in late 2019. Besides the lengthening of average maturities on outstanding debt, sovereigns will continue to finance themselves at lower interest rates than in previous years. In this context, national treasuries will keep locking in favorable financing conditions across the Eurozone, and will likely see annual debt redemptions decline further. As such, we believe that the beneficial direct impact of central banks' policies on sovereigns' debt profiles will persist absent any sovereign-specific interest rate shocks, such as that observed in Italy during the mandate of the previous government.

Overall, much of the economic recovery and growth performance has been cyclical, supported by a highly accommodative stance of monetary policy, and driven by external demand; without additional reforms or , where relevant, rebalancing economic growth structures toward domestic demand, momentum could stall. This was observed in weak economic performances last year in economies most exposed to external demand, such as Germany. Moreover, political uncertainty supported by populism remains significant, as reflected in electoral outcomes--most recently in Spain--and in opinion polls across Europe. We believe this is significantly complicating any progress toward deeper integration of the Eurozone: we think national governments have become more inward-looking and apparently less interested in tackling the outstanding challenges of an incomplete monetary union architecture.

Italy: Weak economic performance is set to continue

Our negative outlook on Italy's sovereign rating reflects its weak economic growth and unambitious reform agenda.

For 2020 we are projecting only a tentative recovery of Italian GDP growth to 0.4% from an estimated 0.2% in 2019. Low business confidence, combined with pressure on corporate operating margins, has dragged on investment spending. While, on the face of it, Italy's labor market has held up rather well, posting over 1% in employment growth last year, high levels of unemployment persist particularly in the south and among younger demographics. While we cannot rule out another early election, our baseline scenario is that the current coalition remains at least through end-2020.

Fiscal policy looks set to loosen modestly during 2020. We forecast a general government deficit of about 2% of GDP this year--more or less in line with our 2019 budget deficit estimate--as lower borrowing costs offset an expected decline in Italy's primary surplus. Such an outcome implies slightly rising public debt to GDP for the next several years, absent a more vigorous economic recovery, compatible with Italy's current sovereign ratings. But the key credit risk remains the potential for political volatility, which has long curbed any appetite among elected governments to undertake structural reforms that would strengthen Italy's competitiveness within the common currency area.

Chart 4

image

France: Structural reforms are ongoing amid a resilient economic performance

We expect that, given resilient economic growth this and next year, the government will continue to implement economic, budgetary, and structural reforms accompanied by a slow budget deficit reduction. This will support the current sovereign ratings.

We expect the French economy to grow by 1.3% in real terms this year. France's economic fundamentals remain strong, in our view, despite sporadic popular protests, most recently in relation to the government's proposed pension system reform. Indeed, compared with some other large eurozone economies, French economic performance has so far withstood adverse external developments, such as weakening economic growth in the eurozone, a decline in international trade, and prospects of a no-deal Brexit.

Ongoing economic and budgetary structural reforms, such as lower corporate taxes and business-friendly labor market policies, are supporting investment as is the ECB's recent extension of its accommodative monetary policy. The government is implementing reforms to tackle some of the longest-standing structural impediments to higher economic growth potential. It has crucially maintained its commitment to the reform program it put in place in 2017.

However, although reforms have strong parliamentary backing, measures relating to unemployment benefits, pensions, and reduction in public spending are being challenged, as reflected in recent strikes related to pension reform. We believe that the government will still prioritize reform implementation, even if somewhat eroded and at the potential cost of slower budgetary consolidation. We expect the budget deficit to be about 2.3% of GDP in 2020, versus the government's 2020 draft budget bill of 2.2%, consistent with the current rating level. The latter incorporates a personal income tax rate cut and a re-indexation of low pensions in line with inflation, partly offset by a slowdown in the decrease of corporate tax rates for large companies, and interest savings, and a lower contribution to the EU budget. A significant and negative deviation from the planned budgetary path--currently not our base case--would place renewed downward pressure on the ratings.

Spain: The new government will face its first tests on economic and budgetary policy

Despite a more complex political arrangement (compared to the single party majorities of the past), we expect Spain's sovereign creditworthiness to hold up in the face of moderating albeit still solid growth. We forecast GDP to expand by 1.7% this year versus our projection of around 2.0% in 2019. That would still mean the Spanish economy is set to outperform the eurozone average by a wide margin, while continuing to operate an external surplus. Also supportive of solid and sustainable growth is the significant progress that households and corporates have made in repairing their balance sheets over the last decade, with private debt having declined by far more than the inevitable increase in public debt since 2009.

Nevertheless, there are some potential risks to what has been an improving credit story. The new minority coalition government has yet to clarify its approach to economic and fiscal policy. Due to the absence of government, Spain did not pass a budget in 2019, and prospects for the passage of one in 2020 will depend on the minority government's ability to build consensus around it. This may prove difficult. The European Commission has demanded that Spain caps planned increases in primary expenditure and commit to further structural efforts to reduce the budget deficit. Meanwhile, coalition members favor increasing social spending (as well as tax receipts). We anticipate that the pro-independence platform of the Catalonian regional government will remain a source of friction in national politics, and could jeopardize the stability of the current coalition government on key votes, including the budget.

The second risk is the drive in some parts of the new coalition to unwind the 2012 labor reform, in particular the decision to enable wage negotiation at a company rather than at the national level. That reform, in our view, gave employers considerably more flexibility to manage costs according to local conditions, in a way that has been unavailable in Italy, for example, where wages are still negotiated nationally. At 13.8%, Spain's unemployment remains the second highest in Europe after Greece. There is a case to be made for measures to reduce the precariousness, as well as the high rate, of unemployment among the young; however, the risk is that new legislation aimed at improving job security will end up pushing employment back into the informal sector.

Portugal: Resilience is rebuilding amid policy continuity

Portuguese public debt should remain on a firm downward path while growth will stay above the eurozone average, supporting prospects for an upgrade over the next two years.

As eurozone growth decelerates in 2020, so will Portugal's, albeit to slightly above the European average as fixed investment remains solid and private consumption holds firm in a supportive labor market and rising net migration, as well as benign domestic financing conditions. We forecast balanced budgets over the next three years. At a projected 3% of GDP for 2020, Portugal's primary surplus is already one of the highest in Europe.

Compared to a decade ago, Portugal is a far more open economy with exports of goods and services equivalent to 45% of GDP, and tourism close to 8% of GDP in direct receipts from abroad. Indeed, during the final quarter of 2019, merchandise export growth recovered some of its vigor such that the current account may have ended the year close to balance (compared to our previous expectations of a deficit of 1.5% of GDP).

Greece: Economic recovery is accelerating with strong budgetary performance and banks on the mend

In 2020, we expect Greece's economic growth to accelerate to 2.5%, from about 2.0% in 2019, surpassing the eurozone's growth average in real GDP per capita terms. We also expect economic performance to remain balanced, fueled mainly by domestic demand and exports. Fiscal measures, such as the reduction of personal income tax for low-income earners, lowering of property tax, and revised schedule for paying tax arrears should support households' disposable income. Private investment is also set to improve alongside increasing net foreign direct investment. The government plans to accelerate its privatization program while facilitating planned private-sector-led projects. We believe successful business-friendly reforms would likely enhance macroeconomic outcomes, while asset protection schemes in the banking sector are likely to accelerate the decline in the currently large stock of nonperforming loans (NPLs), which are in our view impeding a faster recovery in credit activity.

This year's presidential elections will take place under a new arrangement that allows the government a more stable mandate, without related political maneuvering undermining the predictability of economic and budgetary policies. In 2020, we forecast a budget surplus of around 0.8% of GDP, with a primary surplus in line with the 3.5% target agreed with official creditors. This, in turn, will lead to a further decline in gross general government debt to about 166% of GDP this year from just below 174% in 2019. Net of cash buffers, we project net general government debt will decline to about 150% of GDP in 2020 and below 140% in 2022. A steady improvement in economic performance, coupled with further erosion of government debt as a share of GDP and improved monetary transmission via a reduction in NPLs, would support further improvements in Greece's sovereign creditworthiness.

U.K.: All eyes are on the next negotiation stage

Reflecting the Conservative Party's newfound majority--clearing the passage of the Withdrawal Agreement Bill through parliament and diminishing the risk of a no-deal Brexit--we revised the outlook on our sovereign credit ratings on the U.K. to stable from negative and affirmed the ratings at 'AA/A-1+. The negative outlook has been in place since mid-2016, reflecting significant and persistent Brexit-related uncertainties.

Absent a conclusion of the trade deal between the U.K. and the European Union or an extension to the transition period (during which U.K. companies retain tariff- and customs-free access to the single market) beyond December 2020, the U.K. and the EU have only 11 months to hammer out the details of their future relationship. This is an abbreviated timeframe to conclude a multi-sector trade agreement between 28 countries, all of which would need to secure approval through their national (and in some cases regional) parliaments. The EU is by far the U.K.'s most important trading partner, with exports of goods and services to the EU equivalent to 13% of U.K. GDP, versus 5% of GDP to the U.S.

Without the extension, U.K. companies' access to EU customers would revert to WTO terms on Jan. 1, 2021, implying the imposition of significant tariffs on key sectors such as autos, agriculture, and retail trade; the potential introduction of barriers to the U.K.'s services sector; and likely disruption to supply chains. This would hurt the U.K. economy.

Table 1

EMEA Developed Sovereign Rating Strengths And Weaknesses
Sovereign foreign currency ratings Institutional assessment Economic assessment External assessment Fiscal assessment, budget performance Fiscal assessment, debt Monetary assessment

Andorra

BBB/Positive/A-2 3 2 5 1 3 5

Austria

AA+/Stable/A-1+ 2 1 1 1 3 2

Belgium

AA/Stable/A-1+ 3 1 2 2 4 2

Cyprus

BBB-/Stable/A-3 3 2 4 1 6 4

Czech Republic

AA-/Stable/A-1+ 2 3 2 2 1 2

Denmark

AAA/Stable/A-1+ 1 1 3 2 1 3

Estonia

AA-/Stable/A-1+ 2 3 2 2 1 3

Finland

AA+/Stable/A-1+ 2 1 4 1 1 2

France

AA/Stable/A-1+ 2 1 4 3 4 2

Germany

AAA/Stable/A-1+ 2 1 1 1 2 2

Greece

BB-/Positive/B 5 3 5 6

Guernsey

AA-/Stable/A-1+ 2 2 4 1 2 5

Iceland

A/Stable/A-1 2 2 4 2 3 4

Ireland

AA-/Stable/A-1+ 2 1 4 5* 2

Italy

BBB/Negative/A-2 3 3 3 3 6 3

Jersey

AA-/Stable/A-1+ 2 2 4 1 2 5

Latvia

A/Stable/A-1 3 3 2 2 2 3

Liechtenstein

AAA/Stable/A-1+ 1 1 3 1 2 3

Lithuania

A/Stable/A-1 3 3 2 2 2 3

Luxembourg

AAA/Stable/A-1+ 2 1 3 1 2 2

Malta

A-/Positive/A-2 3 2 3 1 2 4

Netherlands

AAA/Stable/A-1+ 2 1 3 1 2 2

Norway

AAA/Stable/A-1+ 1 1 1 1 1 1

Portugal

BBB/Positive/A-2 3 3 5 6 2

Slovakia

A+/Stable/A-1 3 3 3* 2 2

Slovenia

AA-/Stable/A-1+ 3 3 1 1 2 2

Spain

A/Stable/A-1 3 2* 4 5 2

Sweden

AAA/Stable/A-1+ 1 2 2 1 1 1

Switzerland

AAA/Stable/A-1+ 1 1 1 1 1 2

United Kingdom

AA/Stable/A-1+ 3 1 3 3 5 1
1 (%) 17 43 17 60 23 10
2 (%) 40 27 23 27 37 47
3 (%) 40 30 23 13 10 20
4 (%) 0 0 27 0 7 13
5 (%) 3 0 10 0 10 10
6 (%) 0 0 0 0 13 0
Median 2 2 3 1 2 2
Mean 2.3 1.9 2.9 1.5 2.8 2.7
Standard Deviation 0.9 0.9 1.3 0.7 1.7 1.2
*Deterioration since June 2019. §Improvement since June 2019

Table 2

Europe Developed Sovereign Economic Outlook
Real GDP growth (%) GG balance / GDP (%) Net GG debt / GDP (%) Current account balance / GDP (%) Narrow net ext. debt / CAR (%)
2019 2020 2019 2020 2019 2020 2019 2020 2019 2020
Andorra 1.3 1.3 0.6 0.4 (14.5) (14.6) N/A N/A N/A N/A
Austria 1.4 1.4 0.0 (0.1) 66.4 64.5 1.9 2.1 113.7 114.3
Belgium 1.3 1.1 (1.5) (1.2) 91.6 90.8 (1.2) (1.0) 85.5 85.3
Cyprus 3.5 3.0 3.0 2.6 86.2 79.6 (4.7) (4.9) 31.4 28.5
Czech Republic 2.5 2.3 0.3 (0.2) 20.7 19.9 0.2 (0.2) (7.6) (7.4)
Denmark 1.6 1.6 1.8 (0.5) 14.8 15.6 7.4 7.3 46.9 44.6
Estonia 3.4 2.5 (0.1) (0.5) (2.9) (2.2) 1.1 0.8 14.8 13.5
Finland 1.3 1.2 (0.8) (1.0) 20.6 21.0 (1.4) (1.2) 205.5 197.8
France 1.3 1.3 (3.2) (2.3) 91.1 91.5 (0.8) (0.8) 246.9 243.5
Germany 0.5 0.5 0.9 0.3 54.1 52.5 6.3 5.5 52.8 49.8
Greece 2.0 2.5 1.3 1.0 156.4 150.5 (2.3) (2.1) 349.8 339.9
Guernsey 1.2 1.0 0.6 0.5 (81.4) (83.8) N/A N/A N/A N/A
Iceland (0.3) 1.8 (0.1) (1.5) 27.0 27.6 1.5 0.4 45.2 51.1
Ireland 5.8 2.7 0.2 0.2 49.5 47.0 4.0 5.4 229.1 221.1
Italy 0.2 0.4 (2.0) (2.2) 127.9 128.9 2.8 2.4 226.1 224.3
Jersey (States of) 1.0 1.4 (1.6) (1.3) (117.4) (117.7) N/A N/A N/A N/A
Latvia 2.8 2.8 (0.8) (0.7) 29.9 30.2 (0.7) (1.2) 48.5 49.6
Liechtenstein 0.9 1.0 3.8 1.4 (92.9) (94.8) N/A N/A N/A N/A
Lithuania 3.4 2.6 (0.3) (0.5) 29.9 29.8 0.3 (0.1) 32.2 31.6
Luxembourg 2.5 2.8 2.1 1.2 (15.7) (15.3) 4.4 4.6 318.8 289.4
Malta 5.1 4.2 1.0 0.8 34.9 32.6 8.3 7.4 44.5 40.2
Netherlands 1.7 1.3 1.3 0.2 43.7 42.2 9.5 8.8 175.9 171.9
Norway 2.3 2.3 7.0 6.8 (197.1) (181.7) 6.9 8.0 (298.2) (289.1)
Portugal 1.8 1.2 0.0 0.0 110.8 108.1 (0.7) (1.2) 222.2 212.9
Slovakia 2.5 2.4 (0.8) (0.9) 42.5 41.5 (3.0) (2.7) 43.0 43.3
Slovenia 2.6 2.7 0.8 0.4 48.8 45.2 5.1 4.7 44.5 40.9
Spain 2.0 1.7 (2.0) (2.0) 85.8 85.2 1.6 1.6 228.1 220.7
Sweden 1.5 0.9 0.0 0.1 23.3 22.5 3.0 3.4 127.9 128.7
Switzerland 0.8 1.1 0.9 0.6 16.1 15.2 10.9 10.5 15.5 11.5
United Kingdom 1.3 1.0 (2.6) (2.8) 82.1 82.9 (4.7) (4.6) 239.6 230.9
CAR--Current account receipts. GG--General government. N/A--Not applicable.

Sovereign Summaries

Andorra (BBB/Positive/A-2)

  • Analyst: Abril Canizares, abril.canizares@spglobal.com
  • Latest publication: "Principality of Andorra Outlook Revised To Positive On Solid Budgetary Position; 'BBB/A-2' Ratings Affirmed", Jul. 19, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 2
  • External assessment: 5
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 3
  • Monetary assessment: 5
Outlook: Positive

The positive outlook reflects our view that we could raise our ratings on Andorra within the next 24 months if its budgetary position improves in line with our current expectations, or if Andorran authorities make more rapid progress with respect to strengthening its resilience to deal with a potential future financial crisis as well as greater availability of statistical data, for example via membership of the International Monetary Fund (IMF). The positive outlook is also based on our expectation that the Andorran authorities will continue working toward full alignment with international standards that can improve banking supervision and the sector's transparency.

We could revise the outlook to stable if Andorra underperforms against our economic and fiscal expectations. We could also revise the outlook to stable if the country's financial sector faces heightened risks or if the government halts the process of alignment to international financial standards or stops negotiations for its accession to the IMF or its association agreement with the EU.

(Originally published on July 19, 2019)

Table 3

Andorra
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 43.6 36.1 36.8 37.7 40.3 39.1 39.8 41.7 44.0
GDP growth 2.3 0.8 1.9 1.7 1.6 1.3 1.3 1.3 1.0
GDP per capita growth 1.2 (0.5) 1.6 (0.7) 1.6 1.2 1.2 1.2 0.9
Current account balance/GDP N/A N/A N/A N/A N/A N/A N/A N/A N/A
Gross external financing needs/CAR&FXR N/A N/A N/A N/A N/A N/A N/A N/A N/A
Narrow net external debt/CAR N/A N/A N/A N/A N/A N/A N/A N/A N/A
GG balance/GDP 3.2 2.5 5.4 4.6 0.7 0.6 0.4 0.2 0.0
GG net debt/GDP (2.0) (4.2) (8.7) (14.3) (14.2) (14.5) (14.6) (14.4) (14.2)
CPI inflation (0.1) (1.1) (0.4) 2.6 0.6 0.8 1.0 1.1 1.1
Bank credit to resident private sector/GDP 198.0 189.3 167.6 149.0 144.9 141.9 138.8 135.6 132.7
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. N/A--Not applicable. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Austria (AA+/Stable/A-1+)

  • Analyst: Thomas Fischinger, Thomas.fischinger@spglobal.com
  • Latest publication: "Summary: Austria", Sept. 13, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 1
  • External assessment: 1
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 3
  • Monetary assessment: 2
Outlook: Stable

The stable outlook reflects S&P Global Ratings' expectation that Austria will maintain sound public finances, despite lower economic growth. We expect that the decline in public-sector debt will continue but slow down.

We could raise the ratings if ongoing reforms are put in place, as a result of more predictable policymaking, which we would see as confirmation of a stable and efficient institutional framework. A track record of more sustainable decision-making would give uplift to the ratings.

We could take a negative rating action if we observed a substantial deterioration in Austria's economic development prospects, which could arise from a significant external shock to Austria's open economy. We could also take a negative rating action if we observed a substantial deterioration in Austria's fiscal performance, particularly if we also concluded that an erosion of Austria's institutional strength and predictability of policymaking was the cause.

(Originally published on Sept. 13, 2019)

Table 4

Austria
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 52.0 44.5 45.5 47.7 51.6 50.3 51.5 54.1 57.4
GDP growth 0.7 1.0 2.1 2.5 2.4 1.4 1.4 1.4 1.4
GDP per capita growth 0.0 0.1 0.7 1.6 1.9 0.8 0.8 0.8 0.8
Current account balance/GDP 2.5 1.7 2.7 1.6 2.3 1.9 2.1 2.4 2.2
Gross external financing needs/CAR&FXR 195.6 195.2 185.1 174.9 177.2 181.1 176.2 172.0 168.0
Narrow net external debt/CAR 108.6 119.3 109.9 121.4 99.7 113.7 114.3 111.9 110.2
GG balance/GDP (2.7) (1.0) (1.5) (0.7) 0.2 0.0 (0.1) 0.0 0.1
GG net debt/GDP 78.4 78.8 75.5 71.9 68.9 66.4 64.5 62.8 61.0
CPI inflation 1.5 0.8 1.0 2.2 2.1 1.8 1.9 2.0 2.0
Bank credit to resident private sector/GDP 116.5 113.0 115.4 108.0 106.2 105.4 104.1 103.0 101.9
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Belgium (AA/Stable/A-1+)

  • Analyst: Marko Mrsnik, marko.mrsnik@spglobal.com
  • Latest publication: "Summary: Belgium", Sept. 20, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 1
  • External assessment: 2
  • Fiscal assessment, budget performance: 2
  • Fiscal assessment, debt: 4
  • Monetary assessment: 2
Outlook: Stable

The stable outlook reflects S&P Global Ratings' view of balanced risks to Belgium's creditworthiness and expectation that the sovereign's key economic, fiscal, and external credit metrics will remain broadly unchanged over the next two years. We also factor in our assumption that Belgium's federal structure will retain its current form, and that the central government's powers will continue to include managing public finances across the general government.

We could raise the ratings if Belgium's fiscal deficit and government debt steadily declined beyond our current expectations. We could also raise the ratings if Belgium started posting consistent current account surpluses, or if there was a further reduction in the economy's external short-term debt.

We could lower our ratings if Belgium's budgetary position deviates significantly from our current expectations. Deterioration in budgetary outcomes could notably result from an underfunding of additional tax cuts, or adverse economic or financial shocks to the economy, most likely of external nature.

(Originally published on Sept. 20, 2019)

Table 5

Belgium
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 48.0 41.3 42.3 44.5 47.7 46.4 47.4 49.8 52.8
GDP growth 1.6 2.0 1.5 2.0 1.5 1.3 1.1 1.2 1.2
GDP per capita growth 1.1 1.5 1.0 1.5 1.0 0.8 0.6 0.7 0.7
Current account balance/GDP 0.8 1.4 0.6 1.2 (1.0) (1.2) (1.0) (1.0) (0.9)
Gross external financing needs/CAR&FXR 197.1 212.0 202.1 200.4 205.0 207.0 205.9 203.8 200.3
Narrow net external debt/CAR 67.2 76.9 85.0 85.9 80.5 85.5 85.3 81.4 75.0
GG balance/GDP (3.1) (2.4) (2.4) (0.7) (0.7) (1.5) (1.2) (1) (1)
GG net debt/GDP 98.8 97.2 96.7 93.6 92.1 91.6 90.8 89.9 88.7
CPI inflation 0.5 0.6 1.8 2.2 2.3 1.4 1.6 1.6 1.8
Bank credit to resident private sector/GDP 87.6 87.8 90.0 90.7 93.1 94.0 95.0 95.9 96.8
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Cyprus (BBB-/Stable/A-3)

  • Analyst: Aarti Sakhuja, Aarti.sakhuja@spglobal.com
  • Latest publication: "Summary: Cyprus", Sept. 6, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 2
  • External assessment: 4
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 6
  • Monetary assessment: 4
Outlook: Stable

The stable outlook balances our view of Cyprus' strong growth prospects against its still highly leveraged public and private balance sheets.

We could consider raising the ratings on Cyprus over the next two years if the economy deleveraged significantly, or the banking sector reduced its NPEs materially and financial conditions improved.

The ratings could come under pressure if economic growth is significantly lower than our projections, endangering private debt servicing and further financial sector improvements, or if, contrary to our expectations, the general government debt burden rises substantially.

(Originally published on Sept. 6, 2019)

Table 6

Cyprus
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 27.0 23.4 24.6 26.5 28.9 28.7 29.9 31.8 34.2
GDP growth (1.9) 3.4 6.8 4.4 4.1 3.5 3.0 2.5 2.5
GDP per capita growth (1.0) 4.7 6.6 3.6 2.9 3.0 2.5 2.0 2.0
Current account balance/GDP (5.8) (1.0) (0.4) (3.1) (4.4) (4.7) (4.9) (4.9) (4.9)
Gross external financing needs/CAR&FXR 660.2 402.4 328.2 243.5 231.4 223.0 221.5 214.4 205.5
Narrow net external debt/CAR 219.6 172.8 84.4 49.0 35.0 31.4 28.5 25.0 21.5
GG balance/GDP (8.7) (1.0) 0.1 1.7 (4.4) 3.0 2.6 2.4 2.2
GG net debt/GDP 98.8 99.4 92.3 87.1 93.9 86.2 79.6 73.8 68.4
CPI inflation (1.4) (2.1) (1.4) 0.5 1.4 1.3 1.5 1.7 1.8
Bank credit to resident private sector/GDP 252.5 244.4 217.5 193.6 139.2 130.9 126.1 122.0 117.8
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Czech Republic (AA-/Stable/A-1+)

  • Analyst: Niklas Steinert, niklas.steinert@spglobal.com
  • Latest publication: "Summary: Czech Republic", Nov. 1, 2019

Rating assessment snapshot

  • Institutional assessment: 2
  • Economic assessment: 3
  • External assessment: 2
  • Fiscal assessment, budget performance: 2
  • Fiscal assessment, debt: 1
  • Monetary assessment: 2
Outlook: Stable

The stable outlook indicates our view that the Czech Republic's fiscal and external position will remain strong over the next two to three years, despite our expectations of a weaker external macroeconomic environment.

Ratings upside is possible, should the country's income levels converge with those of Western Europe faster than we expect, or if its fiscal and external performance exceeds our expectations.

We could lower the ratings if significantly weaker external demand or diminished competiveness were to weigh on the balance-of-payments performance, alongside a marked deterioration of the government's fiscal position, perhaps due to much weaker economic growth. We could also lower the ratings if clear signs of an overheating economy re-emerged, adversely affecting competitiveness or banking system stability. We do not believe that such developments are likely over the next two years.

(Originally published on Nov. 1, 2019)

Table 7

Czech Republic
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 19.8 17.7 18.5 20.4 23.1 23.3 24.6 26.8 29.3
GDP growth 2.7 5.3 2.5 4.4 3.0 2.5 2.3 2.4 2.4
GDP per capita growth 2.8 5.1 2.3 4.1 2.7 2.2 2.1 2.2 2.2
Current account balance/GDP 0.3 0.1 1.6 1.5 0.3 0.2 (0.2) (0.5) (0.7)
Gross external financing needs/CAR&FXR 97.7 98.8 94.6 90.9 90.2 91.5 92.7 93.6 94.8
Narrow net external debt/CAR 4.7 1.5 (5.5) (7.9) (6.9) (7.6) (7.4) (7.1) (6.3)
GG balance/GDP (2.1) (0.6) 0.7 1.6 1.1 0.3 (0.2) (0.5) (0.5)
GG net debt/GDP 34.2 32.8 28.0 24.0 22.0 20.7 19.9 19.5 19.1
CPI inflation 0.5 0.2 0.7 2.4 1.9 2.6 2.4 2.2 2.2
Bank credit to resident private sector/GDP 53.1 53.2 55.3 55.4 56.1 56.4 56.9 57.1 57.2
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Denmark (AAA/Stable/A-1+)

  • Analyst: Dennis Nilsson, dennis.nilsson@spglobal.com
  • Latest publication: "Summary: Denmark ", Sept. 6, 2019
Rating assessment snapshot
  • Institutional assessment: 1
  • Economic assessment: 1
  • External assessment: 3
  • Fiscal assessment, budget performance: 2
  • Fiscal assessment, debt: 1
  • Monetary assessment: 3
Outlook: Stable

The stable outlook reflects our expectation that Denmark's strong economic, fiscal, external, and monetary credit metrics can withstand most foreseeable shocks. We expect Denmark will maintain low government debt, which we see as an important factor to offset some of the risks associated with the country's still-high household indebtedness and banks' significant external funding needs.

We could lower the rating if we observe material slippages in fiscal or economic performance stemming from weaker institutional and policymaking capabilities. The rating could also come under pressure if the stability of the Danish financial sector was jeopardized by worsening asset quality in the highly indebted private sector, or if external financing comes under pressure.

(Originally published on Sept. 6, 2019)

Table 8

Denmark
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 62.7 53.5 54.9 57.3 61.5 59.7 61.3 64.7 69.1
GDP growth 1.6 2.3 3.3 2.0 2.4 1.6 1.6 1.6 1.7
GDP per capita growth 1.2 1.8 2.4 1.3 1.8 1.0 1.0 1.0 1.1
Current account balance/GDP 8.9 8.2 7.8 7.8 7.0 7.4 7.3 7.1 6.9
Gross external financing needs/CAR&FXR 196.1 190.3 182.5 177.5 183.1 172.4 169.6 164.6 159.4
Narrow net external debt/CAR 54.1 54.6 52.6 49.1 47.5 46.9 44.6 41.5 38.2
GG balance/GDP 1.1 (1.3) (0.1) 1.5 0.6 1.8 (0.5) (0.5) (0.5)
GG net debt/GDP 25.6 23.4 20.3 17.5 16.2 14.8 15.6 16.3 17.1
CPI inflation 0.4 0.2 0.0 1.1 0.7 1.1 1.5 1.8 2.0
Bank credit to resident private sector/GDP 188.2 183.3 179.9 177.0 177.4 175.8 173.3 170.6 167.8
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Estonia (AA-/Stable/A-1+)

  • Analyst: Niklas Steinert, niklas.steinert@spglobal.com
  • Latest published report: "Summary: Estonia", Dec. 6, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 3
  • External assessment: 2
  • Fiscal assessment, budget performance: 2
  • Fiscal assessment, debt: 1
  • Monetary assessment: 3
Outlook: Stable

The stable outlook indicates that we expect Estonia to continue on its trajectory of solid economic growth prospects. We do not expect to see a pronounced and sustained divergence from the previously established fiscal and economic policies over the next two years. That said, the country's wealth level, measured by per-capita GDP, remains lower than those of its peers rated in the 'AA' category.

In the longer term, we could raise our ratings on Estonia if average incomes rose further, converging with levels in the eurozone. This would reflect additional productivity gains in higher-wage sectors, particularly services.

We could lower the rating if external imbalances re-emerged, for example, if wage increases outpaced productivity for a significant period of time. We could also potentially downgrade Estonia if geopolitical or regional security risks were to escalate and weigh on the country's economic performance. We see such a development as unlikely, given Estonia's membership of NATO and the EU.

(Originally published on Dec. 6, 2019)

Table 9

Estonia
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 20.4 17.5 18.3 20.4 23.2 23.3 24.4 26.0 28.1
GDP growth 3.0 1.8 2.6 5.8 4.8 3.4 2.5 2.2 2.2
GDP per capita growth 3.2 1.6 2.7 5.5 4.3 3.2 2.4 2.1 2.1
Current account balance/GDP 0.7 1.8 1.7 2.7 2.0 1.1 0.8 0.5 0.2
Gross external financing needs/CAR&FXR 156.3 164.1 156.9 148.3 148.0 141.7 138.2 136.9 135.3
Narrow net external debt/CAR 27.8 29.5 26.5 26.3 18.8 14.8 13.5 12.4 11.2
GG balance/GDP 0.7 0.1 (0.5) (0.8) (0.6) (0.1) (0.5) (0.8) (0.8)
GG net debt/GDP (5.4) (3.3) (3.3) (3.1) (3.3) (2.9) (2.2) (1.3) (0.4)
CPI inflation 0.5 0.1 0.8 3.7 3.4 2.1 2.3 2.1 2.1
Bank credit to resident private sector/GDP 67.5 68.9 70.5 64.8 62.2 61.3 61.1 61.1 61.1
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Finland (AA+/Stable/A-1+)

  • Analyst: Gabriel Forss, Gabriel.forss@spglobal.com
  • Latest published report: "Summary: Finland", Sept. 13, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 1
  • External assessment: 4
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 1
  • Monetary assessment: 2
Outlook: Stable

The outlook is stable because we expect that continued economic growth, albeit slowing, will support the labor market and aid Finland's gradual fiscal consolidation. In addition, we maintain our expectation that Nordea Bank's re-location of its headquarters to Finland will not present supervision-related challenges or materially affect the country's current external position.

We could raise the long-term rating if the Finnish economy's external metrics improved, seen, for example, in strong and sustained current account surpluses that could result from strengthening market shares of Finnish exports together with improved income balances, or from a material reduction in short-dated external liability positions. Greater reform momentum to address challenges posed by a decreasing and aging workforce, resulting in longer-term sustainability of public finances, would be positive for the rating.

We could consider a negative rating action if structural reforms don't succeed, leading to weaker growth or a substantial deterioration in Finland's fiscal performance, in turn leading to sharply increasing debt.

(Originally published on Sept. 13, 2019)

Table 10

Finland
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 50.4 42.9 43.9 46.4 50.2 48.9 50.1 52.8 56.3
GDP growth (0.4) 0.6 2.6 3.1 1.7 1.3 1.2 1.1 1.3
GDP per capita growth (0.8) 0.2 2.3 2.8 1.5 1.1 1.0 0.9 1.1
Current account balance/GDP (1.3) (0.9) (2.0) (0.8) (1.4) (1.4) (1.2) (1.1) (0.8)
Gross external financing needs/CAR&FXR 436.7 478.3 393.5 338.0 287.0 354.9 352.6 337.1 322.2
Narrow net external debt/CAR 197.1 210.6 223.6 246.9 208.1 205.5 197.8 188.4 177.4
GG balance/GDP (3.0) (2.4) (1.7) (0.7) (0.8) (0.8) (1) (0.8) (0.6)
GG net debt/GDP 21.7 23.5 24.2 21.5 20.4 20.6 21.0 21.2 21.1
CPI inflation 1.2 (0.2) 0.4 0.8 1.2 1.3 1.4 1.6 1.8
Bank credit to resident private sector/GDP 97.6 96.3 94.9 94.0 94.6 95.8 96.8 97.8 98.4
A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast.

France (AA/Stable/A-1+)

  • Analyst: Marko Mrsnik, marko.mrsnik@spglobal.com
  • Latest published report: "Summary: France", Oct. 4, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 1
  • External assessment: 4
  • Fiscal assessment, budget performance: 3
  • Fiscal assessment, debt: 4
  • Monetary assessment: 2
Outlook: Stable

S&P Global Ratings' stable outlook on France (unsolicited AA/Stable/A-1+) reflects our expectation that, against a background of resilient economic growth over the next two years, the government will continue to implement its program of economic, budgetary, and structural reform measures.

Ratings upside could arise if:

  • Economic growth strengthens further, benefitting fiscal outcomes and lowering debt to GDP in a significant and sustained manner beyond our expectations; and
  • Contrary to our expectations, France's current account position shifts into substantial and sustained surpluses, even as domestic demand accelerates.

Conversely, ratings downside could emerge if we considered that:

  • Fiscal deficits have not receded as we currently expect they will, either because of fiscal slippages or a slowdown of the economic recovery; or
  • The government was unable to implement structural reforms, leading to weaker economic growth than we currently envision.

(Originally published on Oct. 4, 2019)

Table 11

France
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 43.2 36.7 37.1 38.8 41.6 40.4 41.2 43.2 45.9
GDP growth 1.0 1.0 1.0 2.4 1.7 1.3 1.3 1.3 1.4
GDP per capita growth 0.1 0.6 0.8 2.1 1.5 1.1 1.1 1.1 1.2
Current account balance/GDP (1.0) (0.4) (0.5) (0.7) (0.6) (0.8) (0.8) (0.7) (0.8)
Gross external financing needs/CAR&FXR 320.9 342.0 314.8 305.6 315.0 325.3 322.4 314.0 305.0
Narrow net external debt/CAR 248.4 261.5 263.7 289.3 237.0 246.9 243.5 235.0 225.2
GG balance/GDP (3.9) (3.6) (3.5) (2.8) (2.5) (3.2) (2.3) (2) (2)
GG net debt/GDP 87.9 88.1 90.6 90.4 90.0 91.1 91.5 91.6 91.3
CPI inflation 0.6 0.1 0.3 1.2 2.1 1.3 1.1 1.4 1.6
Bank credit to resident private sector/GDP 93.8 95.2 97.2 99.8 102.7 105.0 107.6 109.6 111.3
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Germany (AAA/Stable/A-1+)

  • Analyst: Ludwig Heinz, Ludwig.heinz@spglobal.com
  • Latest published report: "Summary: Germany", Oct. 11, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 1
  • External assessment: 1
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 2
  • Monetary assessment: 2
Outlook: Stable

The stable outlook reflects our view that Germany's external and fiscal buffers will help its economy through a period of lower growth rates over the coming two-to-three years.

We could lower our ratings on Germany if we observed a prolonged and severe economic downturn, coupled with persistent negative trends in its flagship manufacturing sectors, or if our view of the ECB's monetary flexibility weakened. We could also lower the ratings if we observed an increase in contingent liabilities, contrary to our expectations.

In addition, there could be negative ratings pressure if contingent liabilities increased as a result of contagion from adverse developments in the eurozone, and any potential required sovereign support were significantly greater than we anticipate.

(Originally published on Oct. 11, 2019)

Table 12

Germany
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 48.2 41.4 42.2 44.4 47.7 46.2 47.2 49.7 53.0
GDP growth 2.2 1.7 2.2 2.5 1.5 0.5 0.5 1.0 1.1
GDP per capita growth 1.9 1.2 1.0 2.0 1.2 0.3 0.3 0.8 0.9
Current account balance/GDP 7.2 8.6 8.5 8.1 7.4 6.3 5.5 5.1 4.7
Gross external financing needs/CAR&FXR 207.0 212.3 200.0 197.2 203.9 205.1 204.3 198.7 192.8
Narrow net external debt/CAR 77.4 74.7 69.4 67.6 53.6 52.8 49.8 45.4 41.1
GG balance/GDP 0.6 0.9 1.2 1.2 1.9 0.9 0.3 0.3 0.3
GG net debt/GDP 70.9 67.4 64.1 59.4 56.4 54.1 52.5 50.7 48.9
CPI inflation 0.8 0.1 0.4 1.7 1.9 1.4 1.4 1.5 1.6
Bank credit to resident private sector/GDP 88.5 87.8 87.3 87.9 88.5 90.1 90.9 90.9 90.9
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Greece (BB-/Positive/B)

  • Analyst: Marko Mrsnik, marko.mrsnik@spglobal.com
  • Latest published report: "Greece Upgraded To 'BB-' On Receding Budgetary Risks And Lifting Of Capital Controls; Outlook Positive", Oct. 25, 2019
Rating assessment snapshot
  • Institutional assessment: 5
  • Economic assessment: 3
  • External assessment: 5
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 6
  • Monetary assessment: 4
Outlook: Positive

The positive outlook signifies that we could raise our ratings on Greece within the next 12 months if the government continues implementing structural reforms that strengthen the country's economic growth potential and public finance sustainability.

In particular, we would consider an upgrade in the context of continuous implementation of reforms addressing the remaining structural challenges in the economy. Another potential trigger for an upgrade would be a marked reduction of nonperforming exposures (NPEs) in Greece's impaired banking system, which would, in our view, benefit the currently challenged monetary transmission mechanism.

We could revise the outlook to stable if economic growth is significantly weaker than we expect or reform implementation stalls, hampering the reduction of government debt and the financial sector's restructuring.

(Originally published on Oct. 25, 2019)

Table 13

Greece
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 21.7 18.1 18.1 18.9 20.3 19.8 20.5 21.9 23.6
GDP growth 0.7 (0.4) (0.2) 1.5 1.9 2.0 2.5 2.7 2.9
GDP per capita growth 1.5 0.2 0.5 1.7 2.2 2.0 2.5 2.7 2.9
Current account balance/GDP (0.7) (0.8) (1.7) (1.9) (2.8) (2.3) (2.1) (1.9) (1.6)
Gross external financing needs/CAR&FXR 350.9 365.4 373.2 312.4 270.5 241.3 235.7 231.9 221.0
Narrow net external debt/CAR 407.3 461.3 452.0 441.5 366.3 349.8 339.9 314.4 291.9
GG balance/GDP (3.6) (5.6) 0.5 0.7 1.0 1.3 1.0 0.8 0.5
GG net debt/GDP 172.8 170.6 170.2 168.1 161.3 156.4 150.5 144.0 137.6
CPI inflation (1.4) (1.1) 0.0 1.1 0.8 0.6 0.8 1.2 1.5
Bank credit to resident private sector/GDP 118.5 115.1 110.3 101.8 91.9 86.2 81.0 76.8 73.7
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Guernsey (AA-/Stable/A-1+)

  • Analyst: Aarti Sakhuja, aarti.sakhuja@spglobal.com
  • Latest published report: "Summary: Guernsey", July 26, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 2
  • External assessment: 4
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 2
  • Monetary assessment: 5
Outlook: Stable

The stable outlook reflects balanced risks to Guernsey's creditworthiness.

Downward pressure could build on the ratings if risks to Guernsey's external environment were to return, testing the ability of Guernsey's authorities to set appropriate policies to mitigate the fallout. For instance, these could pertain to the terms of the U.K.'s future relationship with the EU; in particular, the U.K. financial services sector's future access to the single market. We could also lower the ratings if general government liquid assets--a key rating strength and important buffer against economic shocks--stayed below 100% of GDP for an extended period of time.

We could raise the ratings if Guernsey's financial sector and the broader economy prove more resilient than we expect, or if greater availability of statistical data were to prompt us to revise our assessment of external risks.

(Originally published on Jan. 17, 2020)

Table 14

Guernsey
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 73.4 69.1 63.7 65.2 70.1 69.3 73.6 77.4 82.5
GDP growth 1.2 0.2 3.0 4.6 1.7 1.2 1.0 1.0 0.8
GDP per capita growth 1.8 0.4 3.1 4.9 1.3 1.4 1.2 1.2 1.0
Current account balance/GDP N/A N/A N/A N/A N/A N/A N/A N/A N/A
Gross external financing needs/CAR&FXR N/A N/A N/A N/A N/A N/A N/A N/A N/A
Narrow net external debt/CAR N/A N/A N/A N/A N/A N/A N/A N/A N/A
GG balance/GDP (0.1) (1.4) (0.8) 0.6 0.6 0.6 0.5 0.4 0.3
GG net debt/GDP (81.7) (75.9) (82.8) (87.0) (79.1) (81.4) (83.8) (85.7) (88.0)
CPI inflation 2.3 1.3 0.8 2.3 2.5 2.0 1.9 2.4 2.0
Bank credit to resident private sector/GDP N/A N/A N/A N/A N/A N/A N/A N/A N/A
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Iceland (A/Stable/A-1)

  • Analyst: Ludwig Heinz, ludwig.heinz@spglobal.com
  • Latest published report: "Summary: Iceland", Nov. 15, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 2
  • External assessment: 4
  • Fiscal assessment, budget performance: 2
  • Fiscal assessment, debt: 3
  • Monetary assessment: 4
Outlook: Stable

The stable outlook balances Iceland's strong fiscal and external buffers against risks stemming from the inherent volatility of Iceland's small open economy and a potentially stronger-than-expected slowdown in tourism.

We could raise the ratings on Iceland if its fiscal performance and external position significantly strengthen beyond our current projections over the next two years.

We could lower the ratings on Iceland if we observed signs of increasing balance of payments pressures or risks to the stability of the financial sector over the next two years. These could emerge if this year's reduction in tourism flows had greater economic impact than expected, putting pressure on the balance of payments and the financial system, including the lending activities of pension funds via an impact on the housing market.

(Originally published on Nov. 15, 2019)

Table 15

Iceland
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 54.5 52.8 62.0 72.3 74.5 67.0 65.2 65.1 66.4
GDP growth 2.1 4.8 6.6 4.4 4.8 (0.3) 1.8 2.3 2.4
GDP per capita growth 0.9 3.7 5.5 2.6 1.8 (2.7) 0.3 0.8 0.9
Current account balance/GDP 5.7 6.0 7.6 3.8 2.8 1.5 0.4 0.0 (0.1)
Gross external financing needs/CAR&FXR 99.8 93.4 90.4 80.4 85.2 85.7 89.1 91.7 93.8
Narrow net external debt/CAR 58.3 143.4 55.7 50.7 38.0 45.2 51.1 53.9 55.4
GG balance/GDP (0.1) (0.8) (3.0) 0.5 0.8 (0.1) (1.5) (1.5) (1.3)
GG net debt/GDP 54.4 46.3 39.1 35.5 27.3 27.0 27.6 27.8 27.8
CPI inflation 2.0 1.6 1.7 1.8 2.7 3.1 3.0 3.0 3.0
Bank credit to resident private sector/GDP 152.6 137.6 128.8 131.1 132.9 137.8 138.8 138.7 138.7
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Ireland (AA-/Stable/A-1)

  • Analyst: Remy Carasse, remy.carasse@spglobal.com
  • Latest published report: "Ireland Upgraded To 'AA-/A-1+' From 'A+/A-1' On Prudent Policies and Vigorous Growth; Outlook Stable", Nov. 29, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 1
  • External assessment: 4
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 5
  • Monetary assessment: 2
Outlook: Stable

The outlook is stable because we expect that, despite external risks--including the possibility of a no-deal Brexit--the Irish economy will remain competitive, flexible, and attractive to foreign investment, while the Irish authorities will remain committed to transparency, openness, and fiscal prudence.

We could raise the ratings on Ireland if:

  • Budgetary consolidation accelerates significantly beyond our expectations, resulting in a more pronounced fall in general government debt in absolute terms, and as a percentage of modified gross national income.
  • The U.K.'s departure from the EU does not disrupt bilateral trade flows and supply chains between Ireland and the U.K.
  • We could lower the ratings if we consider that:
  • Brexit substantially damages Ireland's long-term potential growth rate.
  • Fiscal performance deteriorates markedly.

(Originally published on Nov. 29, 2019)

Table 16

Ireland
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 55.8 62.3 63.6 70.2 79.2 80.0 81.8 86.1 91.6
GDP growth 8.6 25.2 3.7 8.2 8.2 5.8 2.7 3.0 3.0
GDP per capita growth 7.9 24.1 2.6 6.8 7.1 4.6 1.5 1.8 1.8
Current account balance/GDP 1.1 4.4 (4.2) 0.5 10.6 4.0 5.4 5.3 5.4
Gross external financing needs/CAR&FXR 446.7 412.3 374.0 332.2 320.7 332.9 322.2 311.0 298.8
Narrow net external debt/CAR 333.7 258.5 227.9 214.8 197.6 229.1 221.1 212.0 201.8
GG balance/GDP (3.7) (2.0) (0.7) (0.3) 0.1 0.2 0.2 0.3 0.3
GG net debt/GDP 94.7 68.9 65.7 58.9 53.5 49.5 47.0 44.5 42.2
CPI inflation 0.3 0.0 (0.2) 0.3 0.7 1.0 1.4 1.5 1.5
Bank credit to resident private sector/GDP 99.8 65.6 60.3 53.3 47.5 43.7 42.8 41.9 41.1
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Italy (BBB/Negative/A-2)

  • Analyst: Frank Gill, frank.gill@spglobal.com
  • Latest published report: "Summary: Italy", Oct. 25, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 3
  • External assessment: 3
  • Fiscal assessment, budget performance: 3
  • 6iscal assessment, debt: 6
  • Monetary assessment: 3
Outlook: Negative

The negative outlook signifies that we could lower our unsolicited ratings on Italy within the next 24 months if:

  • General government deficits and net government debt as a percentage of GDP significantly exceed our forecasts; or
  • Policy changes permanently weaken Italy's potential growth.

We could revise the outlook to stable if we see Italy's economy recovering, while employment growth accelerates, leading to an improvement in public finances.

We could also revise the outlook to stable if we saw further significant progress in restoring Italy's financial sector, for example via the ongoing resolution of nonperforming loans (NPLs) or the introduction and shared financing of a European deposit insurance scheme (as regulated by Directive 2014/49/EU).

(Originally published on Oct. 25, 2019)

Table 17

Italy
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 35.6 30.2 30.9 32.4 34.5 33.1 33.5 34.8 36.7
GDP growth 0.0 0.8 1.3 1.7 0.8 0.2 0.4 0.6 0.7
GDP per capita growth (1.8) 0.8 1.5 1.8 1.0 0.1 0.3 0.5 0.6
Current account balance/GDP 1.9 1.4 2.6 2.7 2.6 2.8 2.4 2.4 2.4
Gross external financing needs/CAR&FXR 217.5 219.0 205.7 209.7 224.3 228.2 225.0 217.3 215.3
Narrow net external debt/CAR 229.5 255.9 239.7 254.5 218.8 226.1 224.3 217.5 207.6
GG balance/GDP (3.0) (2.6) (2.4) (2.4) (2.2) (2) (2.2) (2) (1.8)
GG net debt/GDP 127.0 127.6 126.4 126.4 127.0 127.9 128.9 129.6 129.8
CPI inflation 0.2 0.1 (0.1) 1.4 1.2 0.7 0.7 1.1 1.3
Bank credit to resident private sector/GDP 109.1 106.1 103.0 98.1 94.0 94.1 94.6 94.9 95.0
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Jersey (AA-/Stable/A-1+)

  • Analyst: Aarti Sakhuja, aarti.sakhuja@spglobal.com
  • Latest published report: "Summary: Jersey (States of)", July 29, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 2
  • External assessment: 4
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 2
  • Monetary assessment: 5
Outlook: Stable

The stable outlook reflects balanced risks to Jersey's creditworthiness.

Downward pressure could build on the ratings if risks to Jersey's external environment were to return, testing the ability of Jersey's authorities to set appropriate policies to mitigate the fallout. For instance, these could pertain to the terms of the U.K.'s future relationship with the EU; in particular, the U.K. financial services sector's future access to the single market. We could also lower the ratings if general government liquid assets--a key rating strength and important buffer against economic shocks--fall below 100% of GDP.

We could raise the ratings if Jersey's financial sector and the broader economy prove more resilient than we expect, or if greater availability of statistical data were to prompt us to revise our assessment of external risks.

(Originally published on Jan. 17, 2020)

Table 18

Jersey
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 66.7 62.5 55.8 54.6 58.8 57.7 61.1 64.1 68.0
GDP growth 4.6 2.0 0.8 0.8 1.4 1.0 1.4 1.3 0.8
GDP per capita growth 3.5 0.3 (0.7) (0.5) 0.3 (0.2) 0.2 0.1 (0.4)
Current account balance/GDP N/A N/A N/A N/A N/A N/A N/A N/A N/A
Gross external financing needs/CAR&FXR N/A N/A N/A N/A N/A N/A N/A N/A N/A
Narrow net external debt/CAR N/A N/A N/A N/A N/A N/A N/A N/A N/A
GG balance/GDP (0.3) 0.6 1.2 1.3 (0.6) (1.6) (1.3) (1.2) (0.9)
GG net debt/GDP (105.8) (109.8) (120.1) (127.3) (117.0) (117.4) (117.7) (117.5) (118.8)
CPI inflation 1.6 0.6 1.7 3.2 3.6 2.8 2.7 3.4 2.9
Bank credit to resident private sector/GDP N/A N/A N/A N/A N/A N/A N/A N/A N/A
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Latvia (A/Stable/A-1)

  • Analyst: Niklas Steinert, niklas.steinert@spglobal.com
  • Latest publication: "Summary: Latvia", Sept. 20, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 3
  • External assessment: 2
  • Fiscal assessment, budget performance: 2
  • Fiscal assessment, debt: 2
  • Monetary assessment: 3
Outlook: Stable

The outlook is stable because we believe Latvia's economic growth will moderate but remain resilient in the coming years; fiscal deficits will stay narrow; and the financial sector will weather the remaining, mostly reputational, risks pertaining to the previously large NRD servicing business of parts of the sector.

We could raise the ratings if fiscal results exceeded our current forecast, putting net general government debt on a stronger downward trajectory than we anticipate.

We could take a negative rating action if we observed that significant and tangible pressures built on the financial system, potentially affecting financial stability or the economic outlook. Although we view such a scenario as unlikely, and have no indication thereof, such pressure would likely stem from the NRD banking sector's legacy in the form of additional anti-money laundering (AML) breaches uncovered or extensive reputational damage, warranting sizable government and regulatory intervention well beyond the reform efforts of the past 18 months. Downward rating pressure could also arise if economic growth narrowed significantly compared with our current expectations. Such a development would likely also weigh on fiscal performance, making it very unlikely that the government could remain within its own fiscal targets.

(Originally published on Sept. 20, 2019)

Table 19

Latvia
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 15.8 13.8 14.2 15.7 17.9 18.1 19.1 20.7 22.7
GDP growth 1.9 3.3 1.8 3.8 4.6 2.8 2.8 2.6 2.5
GDP per capita growth 2.7 4.2 2.8 4.6 5.4 3.3 3.4 3.2 3.1
Current account balance/GDP (2.3) (0.9) 1.4 1.0 (0.7) (0.7) (1.2) (1.6) (1.8)
Gross external financing needs/CAR&FXR 184.6 191.7 185.8 180.2 183.5 166.4 161.8 160.2 158.1
Narrow net external debt/CAR 52.1 52.9 51.6 56.6 48.5 48.5 49.6 50.4 49.9
GG balance/GDP (1.4) (1.4) 0.1 (0.5) (0.7) (0.8) (0.7) (0.6) (0.8)
GG net debt/GDP 32.7 32.9 32.5 32.7 29.1 29.9 30.2 30.3 30.6
CPI inflation 0.7 0.2 0.1 2.9 2.6 2.8 2.5 2.5 2.5
Bank credit to resident private sector/GDP 51.3 48.6 47.3 42.4 36.6 33.7 32.2 31.2 30.3
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Liechtenstein (AAA/Stable/A-1+)

  • Analyst: Niklas Steinert, niklas.steinert@spglobal.com
  • Latest publication: "Summary: Liechtenstein", Nov. 29, 2019
Rating assessment snapshot
  • Institutional assessment: 1
  • Economic assessment: 1
  • External assessment: 3
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 2
  • Monetary assessment: 3
Outlook: Stable

The stable outlook reflects Liechtenstein's high political effectiveness and regulatory flexibility to withstand international challenges to the country's tax and economic model. The government's ample financial reserves provide leeway to adapt to potential future challenges and extremely high wealth levels shield the country from the negative effects of any potential short-term economic volatility, given its very narrow economic base. Overall, we believe that Liechtenstein will continue on a strong economic and fiscal trajectory.

Downward pressure on the ratings could occur if we observed increased international tax or financial regulatory pressure on financial centers, including Liechtenstein. This could severely constrain the government's current political strategy and effectiveness over a prolonged period. We currently consider this scenario unlikely over the next two years. In addition, the ratings could come under pressure if external shocks significantly affected economic or fiscal developments, leading to prolonged pressure on Liechtenstein's economic development and a structural deterioration of the country's fiscal position. However, Liechtenstein's public sector has substantial financial and policy flexibility, which provides strong buffers to such potential shocks.

(Originally published on Nov. 29, 2019)

Table 20

Liechtenstein
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 178.2 166.6 165.0 171.9 176.4 177.4 178.8 181.4 186.1
GDP growth 3.6 (0.5) 2.6 5.4 2.4 0.9 1.0 1.3 1.4
GDP per capita growth 2.9 (1.1) 2.0 4.5 1.7 0.2 0.3 0.6 0.7
Current account balance/GDP N/A N/A N/A N/A N/A N/A N/A N/A N/A
Gross external financing needs/CAR&FXR N/A N/A N/A N/A N/A N/A N/A N/A N/A
Narrow net external debt/CAR N/A N/A N/A N/A N/A N/A N/A N/A N/A
GG balance/GDP 2.3 3.8 3.2 2.9 0.5 3.8 1.4 1.4 1.0
GG net debt/GDP (86.1) (89.3) (90.3) (92.4) (88.9) (92.9) (94.8) (95.7) (96.6)
CPI inflation (0.0) (1.1) (0.4) 0.5 0.9 0.4 0.2 0.5 0.7
Bank credit to resident private sector/GDP 346.4 386.5 368.0 196.2 206.0 209.3 212.5 215.0 217.3
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Lithuania (A/Stable/A-1)

  • Analyst: Niklas Steinert, niklas.steinert@spglobal.com
  • Latest publication: "Summary: Lithuania", Aug. 23, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 3
  • External assessment: 2
  • Fiscal assessment, budget performance: 2
  • Fiscal assessment, debt: 2
  • Monetary assessment: 3
Outlook: Stable

S&P Global Ratings' stable outlook on Lithuania balances the prospects of stronger-than-expected fiscal results over the next two years against risks to economic growth emanating from the country's dependence on external demand and adverse demographic trends over the same period.

Ratings upside could arise if we perceived the general government debt-to-GDP ratio on a sustained downward trend. Such a development would follow the clear adherence to the current fiscal rules in place.

Near-term risks to the current ratings mostly pertain to a more pronounced weakening of the external environment that would materially soften Lithuania's growth prospects, consequently weighing on its external and government finances. Domestic risks to the outlook are mostly long term, since the ratings could come under pressure if we observed that unfavorable demographic trends were adversely affecting public finances and the country's economic development prospects. We currently see such developments as unlikely over the next two years.

(Originally published on Aug. 23, 2019)

Table 21

Lithuania
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 16.5 14.2 14.9 16.8 19.0 19.2 20.2 21.8 23.7
GDP growth 3.5 2.0 2.6 4.3 3.6 3.4 2.6 2.4 2.4
GDP per capita growth 4.5 2.8 3.7 5.7 5.1 3.9 3.1 2.9 2.9
Current account balance/GDP 3.5 (2.4) (1.1) 0.5 0.3 0.3 (0.1) (0.5) (0.7)
Gross external financing needs/CAR&FXR 133.7 141.0 140.4 138.8 135.2 130.8 128.8 127.5 126.3
Narrow net external debt/CAR 38.7 46.7 48.0 43.0 31.9 32.2 31.6 29.3 27.0
GG balance/GDP (0.6) (0.3) 0.2 0.5 0.6 (0.3) (0.5) (0.8) (0.8)
GG net debt/GDP 34.1 36.8 36.1 33.1 30.5 29.9 29.8 29.9 30.1
CPI inflation 0.2 (0.7) 0.7 3.7 2.5 2.5 2.5 2.5 2.5
Bank credit to resident private sector/GDP 46.5 46.7 48.7 45.4 44.9 44.5 44.4 44.3 44.2
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Luxembourg (AAA/Stable/A-1+)

  • Analyst: Marko Mrsnik, marko.mrsnik@spglobal.com
  • Latest publication: "Summary: Luxembourg", Sept. 13, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 1
  • External assessment: 3
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 2
  • Monetary assessment: 2
Outlook: Stable

The outlook is stable because we expect Luxembourg will maintain strong credit metrics over the next two years, while effectively managing changing international fiscal regulation and potential materialization of external economic risks.

We could consider a negative rating action if the effects of tighter regulation of corporate taxation frameworks were more pronounced than we expected. This would likely weaken the country's economic growth prospects and fiscal performance, and could weigh on sovereign creditworthiness. The ratings could also come under pressure if credit growth accelerated to levels that would risk undermining Luxembourg's economic and financial stability by, for example, encouraging unsustainable acceleration in asset valuations.

(Originally published on Sept. 13, 2019)

Table 22

Luxembourg
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 120.4 102.6 105.4 108.7 117.8 114.7 117.6 123.9 131.8
GDP growth 4.3 4.3 4.6 1.8 3.1 2.5 2.8 2.6 2.5
GDP per capita growth 1.9 1.9 2.2 (0.7) 1.2 0.6 1.1 0.9 0.8
Current account balance/GDP 5.2 5.1 4.9 4.9 4.8 4.4 4.6 4.5 4.5
Gross external financing needs/CAR&FXR 453.8 542.1 549.4 521.0 543.2 518.5 508.8 492.4 475.4
Narrow net external debt/CAR 320.2 348.7 371.7 377.6 335.6 318.8 289.4 278.1 261.4
GG balance/GDP 1.3 1.4 1.8 1.4 2.7 2.1 1.2 1.2 1.0
GG net debt/GDP (12.7) (13.9) (16.8) (17.2) (15.8) (15.7) (15.3) (14.8) (13.4)
CPI inflation 0.7 0.1 0.0 2.1 2.0 1.7 1.6 1.7 1.9
Bank credit to resident private sector/GDP 82.8 91.8 94.7 99.9 102.5 104.4 105.9 106.3 106.8
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Malta (A-/Positive/A-2)

  • Analyst: Remy Carasse, remy.carasse@spglobal.com
  • Latest publication: "Summary: Malta", Sept. 13, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 2
  • External assessment: 3
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 2
  • Monetary assessment: 4
Outlook: Positive

The positive outlook indicates that we could raise the ratings on Malta over the next six months if:

  • Economic growth and the government's fiscal and debt metrics perform in line with our expectations; and
  • The authorities strengthen supervisory standards with respect to the country's financial sector.

We could revise the outlook to stable if external demand from Malta's key economic partners deteriorated significantly, if risks to financial stability increased, or if Malta's fiscal performance slipped substantially.

(Originally published on Sept. 13, 2019)

Table 23

Malta
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 26.3 24.4 25.4 27.7 30.6 30.4 31.6 33.6 36.1
GDP growth 8.7 10.8 5.7 6.7 6.8 5.1 4.2 4.0 3.9
GDP per capita growth 7.0 8.2 3.2 4.4 3.3 3.0 2.2 2.1 2.0
Current account balance/GDP 5.8 2.8 3.8 11.5 11.3 8.3 7.4 6.4 6.5
Gross external financing needs/CAR&FXR 301.9 322.1 268.0 233.1 240.0 216.0 214.7 211.6 207.1
Narrow net external debt/CAR 68.4 69.1 57.3 50.0 48.2 44.5 40.2 37.3 33.7
GG balance/GDP (1.7) (1.0) 0.9 3.4 1.9 1.0 0.8 0.7 0.7
GG net debt/GDP 57.6 52.8 46.8 40.6 37.8 34.9 32.6 30.5 28.6
CPI inflation 0.8 1.2 0.9 1.3 1.7 1.8 1.8 1.8 1.9
Bank credit to resident private sector/GDP 105.2 93.7 90.0 84.5 82.6 79.5 77.2 75.1 73.1
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Netherlands (AAA/Stable/A-1+)

  • Analyst: Remy Carasse, remy.carasse@spglobal.com
  • Latest publication: "Summary: Netherlands", Nov. 15, 2019
Rating assessment snapshot
  • Institutional assessment: 2
  • Economic assessment: 1
  • External assessment: 3
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 2
  • Monetary assessment: 2
Outlook: Stable

The stable outlook on the Netherlands (unsolicited AAA/Stable/A-1+) reflects our expectation that the Dutch economy will continue to expand over our two-year outlook horizon, allowing for further reduction in government debt while maintaining its net external asset position.

We could lower the ratings if we believed the Dutch economy was unable to withstand the potential adverse effects from a slowdown in world growth, a surge in global protectionism, or a no-deal Brexit. Pressure could also build on the ratings if the fragmented political landscape led to a significant deviation from the country's prudent fiscal policy direction.

(Originally published on Nov. 15, 2019)

Table 24

Netherlands
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 53.0 45.3 46.2 48.8 53.2 52.3 53.4 56.0 59.4
GDP growth 1.4 2.0 2.2 2.9 2.6 1.7 1.3 1.4 1.5
GDP per capita growth 1.1 1.5 1.7 2.3 2.0 1.1 0.7 0.8 0.9
Current account balance/GDP 8.2 6.3 8.1 10.8 10.9 9.5 8.8 8.5 8.3
Gross external financing needs/CAR&FXR 256.0 299.1 277.0 259.0 248.9 250.4 246.4 240.9 235.2
Narrow net external debt/CAR 218.4 216.9 208.5 203.7 176.2 175.9 171.9 166.3 161.9
GG balance/GDP (2.2) (2.0) 0.0 1.3 1.5 1.3 0.2 0.0 0.0
GG net debt/GDP 61.4 58.8 56.3 51.3 46.9 43.7 42.2 41.0 39.7
CPI inflation 0.3 0.2 0.1 1.3 1.6 2.6 1.4 1.4 1.6
Bank credit to resident private sector/GDP 115.9 111.2 114.2 110.9 105.6 103.3 102.4 101.4 100.2
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Norway (AAA/Stable/A-1+)

  • Analyst: Dennis Nilsson, dennis.nilsson@spglobal.com
  • Latest publication: "Summary: Norway", Sept. 20, 2019
Rating assessment snapshot
  • Institutional assessment: 1
  • Economic assessment: 1
  • External assessment: 1
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 1
  • Monetary assessment: 1
Outlook: Stable

The stable outlook reflects our expectation that Norway's credit metrics will remain very strong over our 2019-2022 forecast period, enabling the country to withstand the negative effect of potential oil price shocks, possible escalation of global trade tensions, or a severe housing market correction. If any of these scenarios were to materialize, we believe that there would likely be adequate buffers on both the government's and the country's external balance sheets to absorb losses.

Our 'AAA' rating could come under pressure if we observed rapid erosion of the country's currently robust external and fiscal balance sheets, combined with a significant weakening of institutions and governance standards or a significant rise in geopolitical risk. We currently consider such adverse developments unlikely, however.

(Originally published on Sept. 20, 2019)

Table 25

Norway
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 97.6 74.7 70.8 75.8 82.0 77.2 80.0 85.4 89.6
GDP growth 2.0 2.0 1.1 2.3 1.3 2.3 2.3 2.1 2.1
GDP per capita growth 0.8 0.8 0.2 1.4 0.6 1.4 1.5 1.4 1.4
Current account balance/GDP 10.5 7.9 4.0 4.7 7.2 6.9 8.0 8.0 8.0
Gross external financing needs/CAR&FXR 175.7 183.3 187.0 181.2 175.0 178.6 172.9 166.9 160.3
Narrow net external debt/CAR (234.0) (290.8) (330.5) (367.9) (285.1) (298.2) (289.1) (276.7) (269.9)
GG balance/GDP 8.6 6.0 4.1 5.0 8.1 7.0 6.8 6.5 6.0
GG net debt/GDP (175.7) (204.5) (206.5) (220.8) (197.8) (197.1) (181.7) (169.5) (165.7)
CPI inflation 2.1 2.2 3.6 1.8 2.8 2.3 2.0 1.9 1.9
Bank credit to resident private sector/GDP 134.6 143.8 150.9 151.1 147.7 150.1 150.7 151.5 152.3
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Portugal (BBB/Positive/A-2)

  • Analyst: Frank Gill, frank.gill@spglobal.com
  • Latest publication: "Portugal Outlook To Positive On Strong Policy Commitment, More Resilient External Position; 'BBB/A-2' Ratings Affirmed", Sept. 13, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 3
  • External assessment: 5
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 6
  • Monetary assessment: 2
Outlook: Positive

The positive outlook reflects our view that Portugal's ability to service its high stock of external liabilities continues to strengthen. Steps taken by the European Central Bank (ECB) since 2012 to ensure the singleness of monetary policy within the euro area, and to eliminate the risk of an external refinancing shock, have supported Portugal's export-led recovery.

The introduction of negative deposit rates and the relaunch of asset purchase programs should enable the Portuguese private sector to continue to grow and deleverage at the same time. A large part of Portugal's short-term external debt, roughly 40% of GDP, corresponds to a liability of the central bank, Banco de Portugal, to the ECB. This short-term external debt is not subject to refinancing risk, in our opinion. Excluding it from our calculation of Portugal's external ratios would put upward pressure on our 'BBB/A-2' ratings on Portugal.

Alternatively, should external refinancing risk increase, in our estimates, or should there be an unexpected and sustained deterioration in fiscal and growth performance, we could revise the outlook to stable.

(Originally published on Sept. 13, 2019)

Table 26

Portugal
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 22.1 19.2 20.0 21.5 23.4 22.9 23.4 24.7 26.3
GDP growth 0.8 1.8 2.0 3.5 2.4 1.8 1.2 1.4 1.4
GDP per capita growth 1.4 2.3 2.4 3.8 2.6 2.0 1.4 1.6 1.6
Current account balance/GDP 0.2 0.2 1.1 1.2 0.4 (0.7) (1.2) (1.2) (0.8)
Gross external financing needs/CAR&FXR 259.0 251.5 231.6 215.5 227.5 232.8 229.7 221.4 210.3
Narrow net external debt/CAR 262.2 266.9 243.0 253.3 216.8 222.2 212.9 195.2 176.5
GG balance/GDP (7.4) (4.5) (1.9) (3.0) (0.5) 0.0 0.0 (0.1) (0.1)
GG net debt/GDP 120.6 122.1 120.4 116.0 113.9 110.8 108.1 105.3 102.6
CPI inflation (0.2) 0.5 0.6 1.6 1.2 0.4 0.4 1.0 1.2
Bank credit to resident private sector/GDP 154.9 142.7 131.5 121.4 115.8 112.0 110.9 110.1 109.9
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Slovakia (A+/Stable/A-1)

  • Analyst: Gabriel Forss, gabriel.forss@spglobal.com
  • Latest publication: "Slovakia Ratings Affirmed At 'A+/A-1'; Outlook Stable", July 26, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 3
  • External assessment: 2
  • Fiscal assessment, budget performance: 3
  • Fiscal assessment, debt: 2
  • Monetary assessment: 2
Outlook: Stable

The stable outlook reflects our view that Slovakia's economic growth prospects will remain favorable over the next two years, despite its high reliance on auto exports. In our view, the country's institutional frameworks will be sufficiently robust to generate prudent economic policy that offsets downside risks. These could stem from either credit-driven economic overheating, or from potential difficulties forming government coalitions that could ensue following the upcoming 2020 parliamentary elections.

We could raise the ratings if we saw sustained improvements in Slovakia's institutional arrangements, or faster income convergence with other eurozone member states. We could also consider an upgrade if fiscal performance was stronger than we currently project, resulting in a faster decline in net general government debt as a percentage of GDP.

We could lower the ratings on Slovakia if we observed that slowing external demand took a significant toll on Slovakia's exports and output. We could also downgrade Slovakia if we observed an erosion of its checks and balances to the extent that its ability to execute prudent economy policy weakened.

(Originally published on July 26, 2019)

Table 27

Slovakia
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 18.7 16.3 16.5 17.6 19.5 19.3 20.2 21.6 23.5
GDP growth 2.8 4.8 2.1 3.0 4.0 2.5 2.4 2.7 2.8
GDP per capita growth 2.7 4.7 2.0 2.9 3.9 2.4 2.2 2.5 2.6
Current account balance/GDP 1.1 (2.1) (2.7) (1.9) (2.6) (3.0) (2.7) (2.4) (2.1)
Gross external financing needs/CAR&FXR 130.8 139.2 134.1 133.9 150.7 154.4 151.0 148.6 146.4
Narrow net external debt/CAR 34.0 37.8 39.9 45.0 41.1 43.0 43.3 42.3 41.2
GG balance/GDP (3.1) (2.7) (2.5) (1.0) (1.1) (0.8) (0.9) (0.8) (0.6)
GG net debt/GDP 48.6 46.6 46.3 44.9 42.7 42.5 41.5 40.3 39.0
CPI inflation (0.1) (0.4) (0.5) 1.3 2.5 2.4 2.3 2.2 2.1
Bank credit to resident private sector/GDP 50.8 53.3 57.3 60.4 62.5 64.6 65.4 65.7 66.0
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Slovenia (AA-/Stable/A-1+)

  • Analyst: Ludwig Heinz, Ludwig.heinz@spglobal.com
  • Latest publication: "Summary: Slovenia", Dec. 13, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 3
  • External assessment: 1
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 2
  • Monetary assessment: 2
Outlook: Stable

The stable outlook on Slovenia balances the prospects for further income convergence with the eurozone average via balanced economic growth against the risk of a significant weakening in the external environment and the resulting adverse impact on the Slovenian economy and its fiscal position.

We could raise the ratings on Slovenia if sustainable economic growth propels Slovenia's income in GDP per capita terms further toward the eurozone average.

Conversely, we could lower the ratings on Slovenia if we observed the re-emergence of macroeconomic imbalances, for example emanating from external pressures, significant reversal of the country's budgetary position, or potential imbalances in the labor or housing markets threatening sustainable economic growth or financial stability.

(Originally published on Dec. 13, 2019)

Table 28

Slovenia
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 24.3 20.9 21.7 23.5 26.1 26.1 27.3 29.4 32.0
GDP growth 2.8 2.2 3.1 4.8 4.1 2.6 2.7 2.7 2.6
GDP per capita growth 2.7 2.1 3.1 4.8 4.1 2.6 2.7 2.7 2.6
Current account balance/GDP 5.1 3.8 4.8 6.1 5.7 5.1 4.7 4.2 4.0
Gross external financing needs/CAR&FXR 142.8 142.3 131.7 126.5 127.8 125.5 124.3 122.7 120.9
Narrow net external debt/CAR 75.8 76.2 67.5 62.6 45.9 44.5 40.9 36.8 32.7
GG balance/GDP (5.5) (2.9) (1.9) (0.0) 0.8 0.8 0.4 0.1 0.1
GG net debt/GDP 61.5 61.5 61.6 58.8 52.3 48.8 45.2 42.9 40.7
CPI inflation 0.4 (0.8) (0.2) 1.6 1.9 1.8 2.0 2.0 2.0
Bank credit to resident private sector/GDP 60.6 55.4 51.8 50.2 48.1 47.6 47.1 46.6 46.2
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Spain (A/Stable/A-1)

  • Analyst: Marko Mrsnik, marko.mrsnik@spglobal.com
  • Latest publication: "Spain Ratings Raised To 'A/A-1' From 'A-/A-2' On Economic Resilience; Outlook Stable", Sept. 20, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 2
  • External assessment: 4
  • Fiscal assessment, budget performance: 2
  • Fiscal assessment, debt: 5
  • Monetary assessment: 2
Outlook: Stable

The stable outlook reflects our view of balanced risks to Spain's creditworthiness and our expectation that, despite the ongoing political stalemate, the sovereign's key economic, fiscal, and external credit metrics will remain broadly in line with our forecast over the next two years.

We could raise our ratings on Spain if budgetary consolidation accelerates beyond expectations, resulting in a decline of the net general government debt to below 80% of GDP or general government interest spending falling below 5% of general government revenues; or if the country makes faster progress in paying down the nation's still-large stock of net external debt.

We could lower the ratings if the budget deficit widens significantly again or net general government debt increases above 100% of GDP.

(Originally published on Sept. 20, 2019)

Table 29

Spain
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 29.5 25.7 26.6 28.2 30.4 29.9 30.7 32.5 34.7
GDP growth 1.4 3.8 3.0 2.9 2.4 2.0 1.7 1.6 1.6
GDP per capita growth 1.9 4.0 3.1 2.7 2.1 1.8 1.5 1.4 1.4
Current account balance/GDP 1.7 2.0 3.2 2.7 1.9 1.6 1.6 1.7 1.8
Gross external financing needs/CAR&FXR 241.1 250.0 225.1 209.3 219.7 217.9 214.6 207.9 202.3
Narrow net external debt/CAR 244.9 255.5 239.6 258.5 228.4 228.1 220.7 210.7 199.9
GG balance/GDP (5.9) (5.2) (4.3) (3.0) (2.5) (2) (2) (1.8) (1.5)
GG net debt/GDP 89.0 88.4 89.4 87.9 86.5 85.8 85.2 84.5 83.6
CPI inflation (0.2) (0.6) (0.3) 2.0 1.7 0.9 1.2 1.5 1.6
Bank credit to resident private sector/GDP 131.6 120.8 112.1 105.3 97.8 95.3 93.5 92.3 91.0
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Sweden (AAA/Stable/A-1+)

  • Analyst: Dennis Nilsson, dennis.nilsson@spglobal.com
  • Latest published report: "Summary: Sweden", Aug. 23, 2019
Rating assessment snapshot
  • Institutional assessment: 1
  • Economic assessment: 2
  • External assessment: 2
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 1
  • Monetary assessment: 1
Outlook: Stable

The stable outlook reflects our expectation that Sweden will retain its economic policy flexibility, despite uncertainty regarding the stability of the new government and its reform agenda. We expect that the government will be able to maintain fiscal discipline, leading to a declining net debt burden, and that the economy will continue to expand, albeit at a reduced rate, despite the global slowdown.

We could consider a negative rating action if its policymaking weakened materially, for example, because of political uncertainty, and resulted in significant socioeconomic pressures and slippages in Sweden's fiscal or external position. Although Sweden's public debt is among the lowest of all members of the Organization for Economic Co-operation and Development, its household debt is among the highest, and continues to rise, with a high share of variable-rate debt. Should household indebtedness result in financial instability and rising risks in the financial sector, we could also lower our rating on the sovereign.

(Originally published on Aug. 23, 2019)

Table 30

Sweden
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 60.2 51.7 52.4 54.1 55.0 52.6 51.9 53.9 55.8
GDP growth 2.8 4.4 2.4 2.4 2.3 1.5 0.9 1.3 1.6
GDP per capita growth 1.8 3.3 1.3 0.9 1.1 0.5 (0.1) 0.3 0.6
Current account balance/GDP 4.5 4.1 3.8 2.8 1.7 3.0 3.4 3.7 4.3
Gross external financing needs/CAR&FXR 220.1 236.3 215.9 205.0 233.5 210.0 208.6 202.3 197.1
Narrow net external debt/CAR 120.4 119.4 116.5 120.3 119.7 127.9 128.7 124.0 120.3
GG balance/GDP (1.5) 0.0 1.0 1.4 0.8 0.0 0.1 0.3 0.3
GG net debt/GDP 29.2 29.0 27.1 24.8 24.2 23.3 22.5 21.4 20.3
CPI inflation 0.2 0.7 1.1 1.9 2.0 1.8 1.9 2.0 2.1
Bank credit to resident private sector/GDP 131.0 127.7 132.0 135.3 135.4 138.3 142.2 145.3 148.0
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Switzerland (AAA/Stable/A-1+)

  • Analyst: Ludwig Heinz, ludwig.heinz@spglobal.com
  • Latest published report: "Summary: Switzerland", Aug. 23, 2019
Rating assessment snapshot
  • Institutional assessment: 1
  • Economic assessment: 1
  • External assessment: 1
  • Fiscal assessment, budget performance: 1
  • Fiscal assessment, debt: 1
  • Monetary assessment: 2
Outlook: Stable

The stable outlook reflects our view that Switzerland will continue to post fiscal and external surpluses, and preserve its significant monetary flexibility, effective policymaking, and institutional strength.

We could lower the ratings on Switzerland if we observed an unexpected deterioration in the effectiveness of policymaking, with potential major economic implications. A severe drop in global demand for Swiss exports could also put pressure on the ratings. However, we currently view these downside scenarios as unlikely over our outlook horizon.

(Originally published on Aug. 23, 2019)

Table 31

Switzerland
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 86.1 81.6 79.7 80.1 82.5 83.0 83.9 85.4 87.9
GDP growth 2.5 1.3 1.7 1.8 2.8 0.8 1.1 1.4 1.5
GDP per capita growth 1.2 0.2 0.6 1.0 2.0 0.2 0.6 0.9 1.1
Current account balance/GDP 8.6 11.3 9.5 6.5 10.5 10.9 10.5 10.2 10.3
Gross external financing needs/CAR&FXR 150.8 141.8 138.8 134.2 123.0 120.5 116.4 112.2 108.8
Narrow net external debt/CAR 24.2 26.9 29.2 13.9 16.7 15.5 11.5 6.9 2.2
GG balance/GDP (0.2) 0.6 0.3 1.2 1.4 0.9 0.6 0.3 0.3
GG net debt/GDP 21.1 20.8 19.5 19.2 17.2 16.1 15.2 14.6 14.0
CPI inflation (0.0) (1.1) (0.4) 0.5 0.9 0.4 0.2 0.5 0.7
Bank credit to resident private sector/GDP 169.2 170.3 174.6 179.4 181.3 184.4 187.1 189.0 190.9
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

United Kingdom (AA/Stable/A-1+)

  • Analyst: Aarti Sakhuja, aarti.sakhuja@spglobal.com
  • Latest published report: "United Kingdom Outlook Revised To Stable; 'AA/A-1+' Ratings Affirmed", Dec. 17, 2019
Rating assessment snapshot
  • Institutional assessment: 3
  • Economic assessment: 1
  • External assessment: 3
  • Fiscal assessment, budget performance: 3
  • Fiscal assessment, debt: 5
  • Monetary assessment: 1
Outlook: Stable

The stable outlook reflects offsetting risks to the U.K.'s creditworthiness. In our view, the new government's stronger mandate to progress through the next stage of Brexit negotiations reduces the potential for a disruptive no-deal departure.

We could revise the outlook to negative if merchandise and services exports from the U.K. lose access to key European markets resulting in a material negative economic impact, or external financing diminishes, or sterling's status as a reserve currency comes under pressure. We could also revise the outlook to negative if we saw a high risk of constitutional challenges within the U.K.

We could revise the outlook to positive if trade negotiations with the EU result in key U.K. sectors, including services, retaining access to European markets without penalizing tariffs or significant nontariff barriers once the transition period ends.

(Originally published on Dec. 17, 2019)

Table 32

United Kingdom
(%) 2014 2015 2016 2017 2018 2019e 2020f 2021f 2022f
GDP per capita (in ‘000) 47.4 45.0 41.0 40.4 43.0 41.9 44.0 46.1 48.9
GDP growth 2.6 2.4 1.9 1.9 1.4 1.3 1.0 1.7 1.6
GDP per capita growth 1.8 1.6 1.1 1.3 0.8 0.7 0.4 1.2 1.1
Current account balance/GDP (4.7) (4.9) (5.2) (3.5) (4.3) (4.7) (4.6) (4.7) (4.9)
Gross external financing needs/CAR&FXR 948.3 1,040.3 929.8 809.5 774.7 749.0 727.9 710.2 677.9
Narrow net external debt/CAR 286.0 284.9 257.2 273.9 236.7 239.6 230.9 222.5 210.6
GG balance/GDP (5.6) (4.6) (3.4) (2.4) (2.3) (2.6) (2.8) (3) (3)
GG net debt/GDP 82.3 82.9 82.5 82.2 81.7 82.1 82.9 83.0 83.4
CPI inflation 1.5 0.0 0.7 2.7 2.4 1.9 1.6 1.7 1.9
Bank credit to resident private sector/GDP 136.0 131.2 132.3 135.4 134.8 134.7 134.4 132.7 131.7
CAR--Current account receipts. GG--General government. FXR--Foreign exchange reserves. e--Estimate. f--Forecast. A free and  interactive version of a larger number of sovereign risk indicators can be found at spratings.com/sri

Related Criteria And Research

Related Criteria
  • Sovereign Rating Methodology, Dec. 18, 2017
Selected Related Research

This report does not constitute a rating action.

Primary Credit Analyst:Marko Mrsnik, Madrid (34) 91-389-6953;
marko.mrsnik@spglobal.com
Secondary Contact:Frank Gill, Madrid (34) 91-788-7213;
frank.gill@spglobal.com
Research Contributor:Gauthier Robinet, London 44-20-7176-0637;
gauthier.robinet@spglobal.com
Additional Contact:EMEA Sovereign and IPF;
SovereignIPF@spglobal.com

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