S&P upgrades Austria's credit ratings outlook to positive and sees improvements in energy supply

S&P Global Ratings, the credit rating agency, has upgraded Austria's outlook from stable to positive. The improvement in Austria's energy supply and its solid budget situation were cited as reasons for this change.

S&P's statement on Friday night said that the positive outlook reflects Austria's potential to improve its energy supply position while its economy remains strong over the next 24 month. The company also confirmed the country's long- and shorter-term foreign currency and local currency sovereign ratings of AA+/A-1+.

The agency also stated that the positive outlook reflected the possibility for clear and observable budget consolidation with decreasing budget deficits. It was delivering this view at a time when Austria's Government is preparing to hold general elections on September 29.

S&P stated that it considered Austria’s economy as "broadly resilient", despite the fact that a long-standing take-or pay contract between Austria’s largest energy supplier OMV, and Russian gas company Gazprom will end at the end of this year when the contract for gas transit between Russia and Ukraine expires.

The report noted that Austria has made great progress in diversifying energy sources, despite its high exposure to Russian gas, which accounted for 83% of all gas imports by June.

S&P stated that Austria appeared well-equipped to deal with any short-term disruptions caused by the termination of the transit agreement between Ukraine's Naftogaz, and Gazprom.

Rating agency expects Austria will post a deficit in the general government of 3.0% GDP this year. It forecasts that it would decrease to 2.5% GDP by 2027.

S&P stated that the budgetary plans of a new government following the election may differ from their current forecast and could need to adhere to a more strict consolidation path in order to comply with the fiscal framework of the European Union. (Writing and editing by Dave Graham)

(source: Reuters)