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���������ֳ�-London-28 April 2009: ���������ֳ� has today assigned the Czech Republic's upcoming 5.5-year eurobond an 'A+' rating. The rating is in line with the Czech Republic's sovereign Long-term foreign currency Issuer Default Rating (IDR) of 'A+', which has a Stable Outlook

"The Czech economy will contract in 2009, reflecting its relatively open nature, integration with production lines of western European companies and a manufacturing export base which relies heavily on consumer goods, particularly automobiles," said David Heslam, a Director in ���������ֳ�'s Sovereign team. "However, the Czech economy enters recession from a relatively strong position, with low government debt, a strong banking system and few of the macroeconomic imbalances displayed by some other countries in the CEE region."

���������ֳ� forecasts the economy to contract by 2.5% in 2009, compared with real GDP growth of 3.1% in 2008 and an average growth rate of 5.3% in the five years to 2008. Risks to the short-term growth outlook are weighted to the downside, and are particularly sensitive to the growth outlook in Germany, the Czech Republic's largest trading partner and principal source of investment. ���������ֳ� forecasts a recovery in 2010 with a 1.1% growth in real terms, subject to an economic recovery in the euro area.

The economic downturn will lead to a widening of the general government deficit, which ���������ֳ� forecasts at 4.3% this year compared with 1.4% in 2008. However, the Czech Republic's relatively low level of government debt (29% of GDP compared with an 'A' group median of 39%) provides room for automatic fiscal stabilisers to work before a rise in the government debt ratio begins to undermine comparisons with the rated peer group. ���������ֳ� forecasts government debt at 31% in 2009. The fiscal outlook beyond 2009 is uncertain after the collapse of the Czech government earlier this year. Early general elections are scheduled to take place in October 2009. However, the Czech Republic's moderate government debt level and recent history of prudent fiscal policy mitigate immediate concerns. Over the longer term, securing public debt sustainability will require reforms to reduce the future costs of an ageing population.

The Czech Republic's external position is strong. The current account deficit (CAD) was moderate at 2.9% of GDP in 2008 and has been consistently covered by non-debt creating inflows for much of the past decade. The adjustment of external accounts due to a high imported content of exports and relative price adjustment engendered by the weakening of the CZK since the summer of 2008 should help to contain the widening of the CAD in 2009, despite sharply lower external demand. Gross external debt ratios are low relative to the peer group median while the Czech Republic is an overall net external creditor, a unique position within CEE.

The Czech banking system is largely foreign-owned (97% of system assets), small (private credit/GDP is 50% compared with a peer group median of 91%), is well-capitalised and does not display the vulnerabilities that have contributed to macroeconomic strains in some regional peers. Real credit growth has been moderate from a regional perspective and lending in foreign currencies to unhedged domestic borrowers has not been a feature of credit extension in the Czech Republic, while the loan/deposit ratio is below 100%. The sector as a whole is a net external creditor.

Contacts: David Heslam, London, Tel: +44 (0)20 7417 4384; Edward Parker, +44 (0)20 7417 6340.

Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com.