S&P signals Czech rating upgrade in 15 years as resilient economy weathers headwinds

CZECH REPUBLIC: Global ratings agency S&P revised the Czech Republic's outlook to "positive" from "stable" on Friday, citing increased likelihood for the country's economy to withstand external headwinds.

"The outlook revision to positive reflects Czechia's continued economic convergence process with higher-income peers. We expect the Czech economy to remain resilient in the face of external challenges," S&P said in a statement.

S&P's outlook revision has brought the sovereign a step closer to a potential upgrade, with the agency last lifting the Czech Republic's rating in August 2011.

The country has maintained lower deficits than its peers in central and eastern Europe, keeping below the European Union-mandated ceiling of 3.0 per cent of gross domestic product, a level which Andrej Babis' cabinet also pledged to keep in its programme manifesto.

The move also comes days after the Babis government, which took office last year, approved a 2027 draft budget that is set to widen the deficit for a third straight year to keep up with Babis' pledges to raise spending on public wages, road investments, healthcare and defence.

S&P maintained the nation's long-term 'AA-' foreign currency and 'AA' local currency sovereign credit ratings.