Moody's keeps positive Czech rating outlook -report

PRAGUE, Oct 27 (Reuters) - Moody's is keeping its positive outlook for the Czech Republic's credit ratings, the business newspaper Hospodarske Noviny reported on Friday, quoting the rating agency's head.

"The outlook of (the country's) ratings still remains positive," Chief Executive Raymond McDaniel was quoted as saying. The paper said he did not say whether the agency could cut the outlook in future because of the Czech political crisis.

Moody's lifted the outlook for the Czech Republic's 'A1' foreign- and domestic-currency ratings to positive from stable in March, citing the country's improving economic fundamentals and structural reform efforts.

But policymaking paralysis since an inconclusive election in June, a burgeoning budget deficit and a delay in planned euro adoption have raised concerns in financial markets that a cut in the rating outlook was possible.

Standard & Poor's fuelled market speculation about a looming rating action when its analyst told Reuters last month that the Czech positive rating outlook might be cut to stable if the fiscal gap threatens to jump above 4 or even 5 percent of GDP.

The government expects a deficit of 4 percent of gross domestic product (GDP) in 2007, above the euro zone's 3 percent threshold, because of higher welfare spending.

S&P rates Czech Republic's foreign currency debt at 'A-'. ((Reporting by Marek Petrus; Editing by Mike Peacock; Reuters Messaging: rm://marek.petrus.reuters.com@reuters.net; e-mail: prague.newsroom@reuters.com or marek.petrus@reuters.com; Tel: +420 224 190 477))

Keywords: ECONOMY CZECH MOODY'S