S&P revises Austria’s credit rating outlook to positive, sees energy supply improvements

(Reuters) – Credit rating agency S&P Global Ratings has revised Austria’s outlook to positive from stable, citing the country’s improving energy supply position and solid budgetary situation.

“The positive outlook reflects the potential that Austria’s energy supply position improves further while its economy remains robust over the next 24 months,” S&P said in a statement late on Friday, affirming the country’s AA+/A-1+ long- and short-term foreign and local currency sovereign credit ratings.

The positive outlook also reflected the possibility of clear and discernible budgetary consolidation, with declining budget deficits, the agency added, delivering its view as Austria’s government gears up for a general election on Sept. 29.

S&P said it considered Austria’s economy to be “broadly resilient”, even if a longstanding take-or-pay contract between Austria’s biggest energy supplier OMV and Russian gas firm Gazprom (MCX:) ends at the close of this year, when the gas transit contract between Russia and Ukraine is due to expire.

It noted that while Austria’s exposure to Russian gas remains relatively high, at 83% of total gas imports as of June, it found that the country had made significant progress in diversifying its energy supplies.

Thus, Austria looked well equipped to handle potential short-term disruptions arising from the end of the transit contract between Ukraine’s Naftogaz and Gazprom, S&P said.

The rating agency expects Austria to post a general government deficit of 3.0% of gross domestic product (GDP) this year, which it forecast would shrink to 2.5% by 2027.

S&P noted that budgetary plans pursued by a new government after the election could differ from its current forecast, and might need to follow a stricter consolidation path to be compliant with the European Union’s fiscal framework.