Nov 25, 2023

Moody’s Upgrades Czech Republic’s Economic Outlook

U.S. financial services firm Moody’s has upgraded the Czech Republic’s economic rating outlook from negative to stable, citing reduced risk linked to Russian gas supplies.

The country’s shift to alternative gas sources and lowered gas demand by households and businesses contributed to this change.

In August, the Czech Republic agreed to buy the main Czech gas storage company RWE Gas Storage CZ to bolster energy security, and in May signed a deal to boost capacity along the Transalpine Pipeline and cut off dependence on Russia from 2025.

“The Czech Republic has become independent from Russian gas thanks to an effective substitution of Russian gas and structurally lower demand,” Moody’s said in its statement.

About 98% of the Czech Republic’s gas supply was imported through pipelines from Russia prior to the Russia-Ukraine war, according to the ratings agency.

On Friday, Czech Prime Minister Petr Fiala said he supported Slovakia’s request to continue exports of fuel produced from Russian oil to the Czech Republic beyond a Dec. 5 deadline.

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According to Moody’s, fiscal consolidation (policy to reduce debt) of around 2 percent of GDP over two years stabilizes the country’s debt burden.

Furthermore, proposed pension reforms aiming to restrain costs from an aging population have increased Czechia’s rating.

Relatively strong growth dynamics, increasing levels of wealth, a competitive economy, and high-quality institutions also underpin the rating upgrade.

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