S&P Lowers Outlook on Slovenia to Negative

By Dow Jones Business News, 

S&P Lowers Outlook on Slovenia to Negative

Standard & Poor's Ratings Services on Friday lowered its outlook on Slovenia to negative from stable, pointing to the recent resignation of the country's government and the resulting coming elections that could affect economic policies and fiscal pressures.

In early May, Prime Minister Alenka Bratusek said she would step down to allow for parliamentary elections to take place in June, one week after she lost the leadership of her Positive Slovenia party after just a year in office.

On Friday, S&P, which backed its single-A negative rating on Slovenia, said the country's debt burden is rising sharply amid the government's support of state-owned banks, as well as weak economic growth prospects. Slovenia escaped an international bailout for its financial industry in December by pumping $4.4 billion of taxpayers' funds into its ailing banks.

The agency said the negative outlook reflects its opinion that there is a greater than one-in-three probability of a downgrade over the next two years.

Meanwhile, S&P said the current investment-grade rating, which is four notches above junk territory, reflects its view that Slovenia has an open and relatively wealthy economy. The ratings agency said the country has performed better than its January forecast and has shown continued strong external performance.

However, those economic strengths are moderated by uncertain policy responsiveness, leading to a further weakening of both policy credibility and economic growth prospects, the firm said.

Write to Anna Prior at anna.prior@wsj.com

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