Vienna, June 7 — Austria has suffered a financial setback as Fitch Ratings downgraded the country’s long-term foreign currency credit rating from “AA+” to “AA” on Friday, citing a ballooning budget deficit and rising debt levels. The outlook remains “stable,” according to the agency’s latest report.
Fitch pointed to Austria’s 2024 budget deficit of 4.7% of GDP—well above its earlier forecast of 3.7%—as a key reason for the downgrade. Despite a government plan to rein in spending, Fitch expects national debt to continue climbing, stabilizing only between 2027 and 2029 at around 86% of GDP.
“The government’s consolidation program is clearly outlined and aims to minimize impact on the broader economy,” Fitch acknowledged. However, it warned that continued economic stagnation could undercut revenue growth and weaken those efforts.
The agency’s current forecast sees the deficit shrinking slightly—to 4.3% this year and 3.9% in 2025—striking a middle ground between government projections and Fitch’s more optimistic outlook earlier this year.
Austria’s economic performance also weighed on the rating. Fitch expects stagnation in 2024, following last year’s downturn, with modest growth only returning in 2026. Risks such as rising labor costs and potential U.S. tariffs could further erode Austria’s competitiveness.
Still, Fitch highlighted some strengths, including Austria’s private sector and robust banking system. The country also boasts the longest average maturity for sovereign debt in the EU—11.4 years—helping shield it from near-term refinancing pressure.
Interest payments are expected to rise from 2.9% of government revenue in 2024 to 3.6% by 2026.
