January 24, 2014 / 5:01 PM / in 4 years

Fitch Affirms Autonomous Community of Madrid at 'BBB'; Negative Outlook

LONDON/MADRID/PARIS, January 24 (Fitch) Fitch Ratings has affirmed the Autonomous Community of Madrid’s Long-term foreign and local currency Issuer Default Ratings (IDR) at ‘BBB’ with Negative Outlook. Fitch has also affirmed its Short-term foreign currency IDR at ‘F2’. The ratings reflect the autonomous community’s economic prosperity relative to national levels and efforts in cutting back large expenditure, including at public sector entities (PSEs). They also take into account Fitch’s expectations that fiscal performance will remain weak in 2014 and that debt will slightly increase in 2013-2015. The Negative Outlook reflects the negative current balance of EUR1,190m presented in its 2014 budget (negative 8.3% current margin), against Fitch’s previous expectations of a positive current balance. KEY RATING DRIVERS Although Madrid would be posting a negative current balance for the third year in a row, the EUR1,190m is still in compliance with the fiscal deficit target of 1% of regional GDP. We consider the 2014 budget is conservative as it assumes a 2.4% decline in revenues from the central government, when Fitch expects national GDP to grow 2%. Fitch therefore believes that Madrid could later receive a significant positive tax settlement from the state in the 2016 budget. In 2012, Madrid reported a negative current balance of EUR2,239.3m, but this included EUR1,263.4m of exceptional expenditure relating to the 2010-2011 period.International Local and Regional Governments Rating CriteriaAdditional Disclosure Solicitation StatusALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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