Fitch affirms Czech Republic

Fitch Ratings said it affirmed the Czech Republic's A foreign- and A+ local-currency issuer default ratings, F1 short-term rating and AA country ceiling.

The outlook is stable.

The agency said the Czech Republic's ratings are supported by ongoing rapid real convergence with western Europe, a strong external financing position, a moderate general government debt stock and better-than-expected performance of public finances.

"In many ways, the Czech Republic's credit fundamentals compare well with its A rated peer group," David Heslam, a director in Fitch's emerging Europe sovereign team, said in any agency rating. General government debt is in line with the peer group median of 31% of GDP and better than the median when expressed as a share of government revenues, reflecting the country's deep tax base, the agency said, and fiscal performance has benefited from accounting revisions and an economic upswing, with the general government deficit narrowing to an estimated 3% of GDP in 2006 from an average of 6.4% of GDP in the early years of this decade.

The ratings and outlook reflect a balance between the Czech Republic's evident credit strengths, its relatively short history of fiscal prudence and increased uncertainty over the fiscal path from 2007, Moody's said, adding that the general government deficit fell below 6% of GDP only in 2004 and there are signs that the expenditure control mechanisms that contributed to the narrowing of the deficit have weakened.

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