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S&P Affirms A- Rating and Stable Outlook for Slovenia

London, 17 January (STA) - Rating agency Standard&Poor's (S&P) affirmed Slovenia's sovereign credit rating at A- with a stable outlook on Friday. The agency expects progress in the shoring up of public finances and observes a stabilisation of the political situation. S&P also feels the state responded well to banks' problems and that no bailout will be needed.

The stable outlook is based on the expectation that the shoring up of public finances and the restructuring of banks will continue. Another condition is that the incumbent coalition stays in power until the next regular general election, scheduled for 2015.

S&P observes some delays in structural reforms, while it expects progress in the mid-term in reform measures meant to boost growth.

The agency forecast a 1% contraction of Slovenia's GDP for this year and a recovery to 0.9% growth next year. In 2016 the economy is already expected to expand by 2.1%. This would mean the crisis would have caused an aggregate GDP drop of around 6%.

The government budget deficit, which is assessed to have reached 15.7% of GDP last year as a result of bank recapitalisation costs amounting to 11.4% of GDP, is expected to fall to 7.2% of GDP. Next year a 2.5% deficit is expected, which would bring Slovenia back in compliance with the Maastricht criteria.

The total costs of the salvaging of banks, initially put at 17.1% of GDP by S&P, will amount to 15.4% in the worst case scenario, according to the agency's latest assessment.

Public debt is expected to reach its highest level this year, when it is to climb to 75.6% of GDP and stabilise around this point after that.

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