S&P Holds Czech Ratings, Outlook Stable

International agency Standard & Poor's on Friday affirmed the Czech Republic's foreign and local currency sovereign credit ratings and said the export-reliant country's economic outlook was stable.

S&P said it was sticking to its long-term foreign currency rating of "AA-," while the local currency rating would stay at "AA."

"Our ratings on the Czech Republic reflect our view of its prudently managed and balanced economy, characterized by low levels of foreign borrowing," it said.

It also underlined that the Czech central bank had been able to keep both consumer price inflation and interest rates at low levels.

The Czech Republic is fuelled by exports, notably of cars produced in the local plants of Germany's Volkswagen, South Korea's Hyundai and a joint venture between Japan's Toyota and France's PSA Peugeot Citroen.

"The Czech economy is small, competitive, and open. Its growth prospects are closely linked to external demand, particularly in its major European trading partners," underlined S&P.

Although the 2004 European Union entrant has not joined the Eurozone, many of its key export destinations are in the debt-ravaged currency bloc.

In 2009, Czech output shrank by 4.7 percent against the previous year as the global crisis hit hard, paving the way for an austerity drive.

In 2010, the Czech economy expanded by 2.7 percent, before growth slowed to 1.7 percent last year.

The Czech central bank expects the economy to contract by 0.9 percent this year before a pick-up to 0.8-percent growth in 2013.

"In our view, the recovery is likely to be muted in 2013," said S&P, noting that renewed austerity would weigh heavily on the economy of the nation of 10.5 million people.

"Growth should strengthen from 2014 as the global economy recovers, which will boost both domestic demand and external trade in the Czech Republic," it added.