After Moody's, Fitch also downgraded Slovenia's sovereign rating, suggesting that it will be next Eurozone nation to seek external aid.
Moreover, Fitch warned that the rating will be lowered further if the recession goes deeper and longer than anticipated, or if policymakers fail to clean up the balance sheets of the banking sector.
Fitch cited significant deterioration in Slovenia's macroeconomic and fiscal outlook as the major reason for the rate cut. It has 'BBB+' rating, three notches above junk grade.
Fitch forecasts a 2 percent contraction in real GDP in 2013 and a decline of 0.3 percent in 2014. The general government deficit will rise to 5 percent of GDP in 2013 from 4 percent in 2012, it said.
The government is trying to fix problems related to non-performing loans of major lenders, by creating a so-called bad bank to cleanse balance sheets.
There remains a significant divergence between official and Fitch estimates of bank recapitalization costs, the agency said.
Fitch calculates a further capital injection requirement of EUR 2.8 billion. Of this, the state needs to inject EUR 2 billion into the three largest banks, which is more than twice the latest official estimate.
Recently Moody's Investors Service downgraded Slovenia's credit rating to 'junk' as the risk that the nation may require external assistance to meet its financial obligations has increased, largely due to uncertain funding environment.
For comments and feedback: editorial@rttnews.com