Moody's downgrades Slovenia

Moody's Investors Service said it downgraded Slovenia's local- and foreign-currency government bond ratings by one notch to Aa3 from Aa2 and placed the ratings on review for possible further downgrade.

The downgrade reflects the increasing risk that the government may be called upon to provide additional support to Slovenia's banking system, Moody's said.

The ongoing financial crisis has exposed vulnerabilities in the banking system's asset quality, capital adequacy and short-term external funding model, the agency said.

The downgrade also considers the weakening outlook for the medium-term economic growth from the deleveraging expected in the corporate sector, anticipated constraints on credit availability due to stress within the banking system and expected deceleration of export growth as a result of the global economic slowdown, Moody's said.

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