Fitch Ratings reaffirms Germany’s AAA rating, maintaining stable outlook


(MENAFN) On Friday, Fitch Ratings announced that it has reaffirmed Germany's long-term foreign-currency issuer default rating at AAA with a stable outlook. This rating reflects Germany's robust and diverse economy, supported by strong institutions, a track record of fiscal responsibility, and very low government financing costs. The stable outlook underscores confidence in Germany’s economic fundamentals and governance.

However, Fitch highlighted concerns about Germany’s medium-term economic growth prospects, which are expected to be weak due to long-standing structural challenges. The agency noted that Germany’s potential growth rate is likely to decline significantly, primarily driven by an aging population and, to a lesser extent, the recent energy crisis. This anticipated slowdown reflects underlying issues that could impact the country's economic performance in the future.

Forecasts from key German and European economic institutions, including the Bundesbank, the Ministry of Finance, the German Council of Economic Experts, and the European Commission, predict that Germany’s potential growth will fall to between 0.7 percent and 0.4 percent in the coming years. This is a notable decrease from the growth rate of over 1 percent observed before the pandemic, indicating a significant slowdown in economic potential.

Fitch also cautioned that the AAA rating could face downward pressure if Germany experiences a substantial loss of competitiveness, which would lead to a significant revision in its potential output. Additionally, a substantial increase in general government debt over the medium term, resulting from prolonged budget deficits or weaker economic growth, could trigger negative rating actions. These factors highlight the need for careful management of economic and fiscal policies to maintain Germany’s high credit rating.

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