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Local government

Moody's Downgrades City of Vienna's Baseline Credit Assessments and Affirms Regional Governments

Strategic Insights

— 2 min read

The City of Vienna's Baseline Credit Assessments (BCA) were downgraded to aa3 from aa2, reflecting fiscal challenges, while the State of Lower Austria's aa3 BCA and State of Carinthia's a1 BCA were affirmed. The ratings of all six entities were affirmed, with Moody's changing the outlooks to negative from stable on three regional governments - City of Vienna, State of Lower Austria, and State of Carinthia - as well as on three government-related issuers (GRIs) - Autobahnen-Und Schnellstrassen Finanzierungs (ASFINAG), Kaerntner Ausgleichszahlungs-Fonds (KAF), and Bundesimmobiliengesellschaft m.b.H. (BIG).

The revision of the outlooks to negative from stable on the City of Vienna, the State of Lower Austria, and the State of Carinthia reflects the institutional, operational, and financial linkages between the Government of Austria and its regional governments. As with the federal government, the regional governments are also confronted with a challenging fiscal situation, with weak economic growth expected to translate into weak revenue growth for the regions combined with expenditure pressure.

Key Takeaways:

  • The City of Vienna's Baseline Credit Assessments (BCA) were downgraded to aa3 from aa2, reflecting fiscal challenges.
  • The State of Lower Austria's aa3 BCA and State of Carinthia's a1 BCA were affirmed.
  • Moody's changed the outlooks to negative from stable on three regional governments - City of Vienna, State of Lower Austria, and State of Carinthia.
  • The ratings of all six entities were affirmed, with the City of Vienna's Aa1 long-term issuer rating, Lower Austria's Aa1 long-term issuer and senior unsecured ratings, and Carinthia's Aa2 long-term issuer rating reflecting their strong institutional framework, ongoing reliable market access, and robust debt affordability.
  • The City of Vienna's BCA was downgraded to aa3 from aa2 due to fiscal challenges, including a gradual increase in debt due to persistent deficits, with efforts to contain these challenges only recently initiated and a turnaround not envisioned until 2029/30.
  • The affirmation of State of Lower Austria's ratings, and its aa3 BCA, reflects its solid budget consolidation efforts, despite low primary operating surpluses in 2025 and 2026 with overall planned financial deficits.
  • The affirmation of State of Carinthia's rating, and its a1 BCA, reflects Austria's strong institutional framework and the state's sound budgetary management, which are counterbalanced by relatively high and increasing debt burden.

Statistics:

  • GDP per capita (PPP basis, US$): 72,819 (2024)
  • Real GDP growth (% change): -1% (2024)
  • Inflation Rate (CPI, % change Dec/Dec): 2.1% (2024)
  • Gen. Gov. Financial Balance/GDP: -4.6% (2024)
  • Current Account Balance/GDP: 2.4% (2024)
  • External debt/GDP: 157.5%
  • Economic resiliency: aa3
  • Default history: No default events (on bonds or loans) have been recorded since 1983

Sources:

  • Moody's Ratings
  • The sovereign press release: https://ratings.moodys.com/ratings-news/449200
  • The List of Affected Credit Ratings: https://www.moodys.com/viewresearchdoc.aspx?docid=PBC_ARFTL511788
  • Guarantees, Letters of Credit and Other Forms of Credit Substitution Methodology published in July 2022
  • Regional and Local Governments published in May 2024
  • Government-related Issuers published in May 2025

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