By Ovunc Kutlu
ISTANBUL (AA) - Fitch Ratings said Friday it affirmed Germany's long-term foreign-currency issuer default rating at AAA with a stable outlook.
The rating reflects Germany’s diversified, high value-added economy and strong institutions, while it is supported by a record of fiscal prudence and very low government financing costs.
Germany's medium-term economic growth prospects are weak, however, reflecting long-standing structural challenges, according to Fitch.
"Germany's potential growth is likely to decline significantly, primarily due to an aging population and, to a lesser extent, the recent energy crisis," it said in a statement.
"Forecasts from the Bundesbank, Ministry of Finance, German Council of Economic Experts, and the European Commission indicate that potential growth will drop to between 0.7% and 0.4% in the coming years from above 1% before pandemic," it added.
Fitch warned that the rating could be downgraded if there is a significant loss of competitiveness, which would lead to a strong further revision in the country's potential output.
A large increase in general government debt over the medium-term, due to a prolonged period of wider budget deficits or weaker growth, could also lead to a negative rating action, it added.