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Euro adoption to increase the Slovak rating to A+
( 10 / July / 2008 )
Slovakia’s entry to the eurozone in January 2009 helps to bolster the country’s credit ratings and improves investor sentiment towards the country.
The international rating agency Fitch increased the long-term foreign currency rating for Slovakia from A to A+. ‘Upcoming entry to the eurozone is a deterrent to external financial shocks,’ says Moody’s Investors Service which has an A1 sovereign rating for Slovakia.
At the same time, demand management and inflation control will become more difficult given the easing of the monetary stance implied by the alignment of key interest rates with the prevailing ECB policy rate by end of 2008. Since January 2004 the Slovak Koruna has appreciated by 28 %, which played a key role in mitigating pressure in the country in recent years.
The EU Finance Ministers decided that upon entry to the eurozone, the exchange rate will be set on 30.126 SKK/EUR.
Investors will be more willing to take on Slovakian credit risk once the foreign exchange rate risk is eliminated. Euro adoption should help to encourage further foreign investment in Slovakia, both into greenfields and mergers or acquisitions.
Source: iHned.cz, Euromoney