International rating agency Moody's reaffirmed the Czech Republic´s rating of its liabilities at "A1" with a stable outlook. The agency especially appreciated the management of public finances including the stabilization of the tax system, resilient banking system and the limited impact of the debt crisis in the euro area. The main rating was reaffirmed to the Czech Republic for the sixth time. Ratings of risk in domestic currency and foreign currency bonds were partialy improved.
"The Czech Republic showed strong steps to reduce the budget deficit and commitment to continue its decline. It is a basic parameter of fiscal credibility, "said Moody's. The agency also recalled a tax provision before the existence of the new government after the fall of Petr Necas´s cabinet . Last year, according to Moody's, Czech Republic overcame the objectives of fiscal consolidation for the third consecutive year in a row "despite extremely unfavorable macroeconomic environment and political tensions that led to the collapse of the governing coalition," said Moody's.
"CR reported in the 2012 budget deficit at 4.4% of GDP and significantly build on the better-than-expected 3.25% in 2011. Adjusted for one-time effects, however, the budget deficit last year was only 2.5% despite the impact of the economic recession, "Moody's said. Czech economy last year fell by 1.2%, while Moody's predicts 0.3% growth for this year with budget deficit at 3% of GDP.
Moody's sees limited impact of debt crisis in the eurozone on the Czech Republic. "A key strength of the Czech economy is highly liquid and well capitalized banking system that provides a stable financial base. This reduces dependency on government funding from foreign investors and there is protection against fluctuations in the financial markets, "said a Moody's.