Page 32 - Central & Southeast Outlook 2020

4.6 ​Debt - Slovakia
Government debt in Slovakia increased to €43.3bn in 3Q19, up from €42.9bn in 2Q19.
According to the European Commission, the general government debt-to-GDP ratio will “remain on a declining path, thanks to the pace of nominal economic growth”. The ratio is projected to decline to 48.1% this year, 47.3% in 2020, and 46.9% in 2021.
Slovakia's government bond yields turned negative in 2019, with a decline in yields on both mid-term and short-term debt, pointed out Erste Group Research.
5.0​ ​Financial sector 5.1 ​Finance - Czech Republic
The results of the central bank’s supervisory stress tests on banks showed t​he Czech banking sector is resilient to hypothetical adverse economic developments.​Its capital ratio would decrease to 14.8% in case of such developments, well above the regulatory minimum of 8%.
In 2019, rating agency Moody’s downgraded outlook of the Czech banking sector from positive to stable, mostly due to a slowdown in economic growth. The agency said that after years of rapid credit growth when the Czech Republic was one of the fastest growing countries in CEE it expects a slight deterioration in the quality of the Czech loan portfolio. The performance of Czech banks in the next 12 to 18 months will remain healthy, but stable, as economic growth gradually slows down.
According to Raiffeisen Research’s Central and Eastern Europe (CEE) outlook, the Czech central bank will remain in stand-by mode for most of 2020. It is expected to start cutting rates in 4Q20, due to declining inflation amid the anticipated economic slowdown. Czech interest rates are expected to drop slowly.
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