Central European credit ratings, most of which carry a stable or positive outlook, are quite resilient, but the way the new U.S. administration delivers on its pre-electoral promises could pose a challenge, S&P Global said on Thursday.

Under some scenarios, higher U.S. trade tariffs on the European Union and higher uncertainty over the Russia-Ukraine war might deter central Europe's growth via weaker external demand in western Europe, it said in a report titled the Central and Eastern Europe Sovereign Rating Outlook for 2025.

The Czech Republic, Hungary and Slovakia are considered the most exposed through deep ties with the German car sector as suppliers and manufacturing bases for German brands. Poland, the region's largest economy, is likely to be less affected due to lower reliance on exports and a more diversified economy.

"The ratings are quite resilient. Our baselines could be tested by the way the new U.S. administration delivers on its pre-electoral promises," Karen Vartapetov, lead analyst for CEE & CIS Sovereign Ratings told Reuters.

"Indirect spillovers through weakness in advanced Europe, including Germany, could be quite substantial," he said. "Baseline holds that ratings are going to be resilient, but the uncertainty over that baseline has somewhat increased."

Vartapetov said if German domestic demand is resilient, Polish exports would likely not suffer as much as peers in central Europe such as Hungary or the Czech Republic, whose exports are more heavily geared towards the car sector.

Poland, the European Union's largest economy outside the euro zone, also has by far the highest ratio of defence spending relative to economic output in NATO - meaning it will likely avoid calls from President-elect Donald Trump for more spending.

"Poland is better positioned both politically and economically for whatever happens with the new Trump administration vis-a-vis Europe," said Tony Housh, chairman of the American Chamber of Commerce in Poland.

"It will be impacted if we end up with trade complications, just less so than many other countries. And in some cases, perhaps dramatically less so than some."

The positive Polish story could still be disrupted if the German economy next door goes into severe recession, and depending on how the war in neighbouring Ukraine develops. Both are major risk factors, some investors warn.

CONSTRUCTIVE OUTLOOK

Overall, though, Vartapetov said S&P was constructive on central Europe's growth outlook, barring a substantial external shock or major escalation of world trade tensions, which could derail the global and European growth stories.

"In our baseline, CEE will remain one of the fastest growing regions in the world and, despite all the challenges coming from demographics, we are talking about a reasonable growth performance in the medium term," he said.

S&P expects GDP growth in central Europe to accelerate to 2.8% next year from 2% in 2024 on stronger consumer spending and investments, spurred by EU funds.

Vartapetov said central banks in Poland and Hungary were likely to resume interest rate cuts next year, although currency volatility and sticky services inflation across the region created "an extremely difficult backdrop" for policy makers.

He also said a more fragmented political landscape after elections in Romania would likely complicate efforts to rein in the EU's highest budget deficit from around 8% of GDP, which Romania aims to achieve in a seven-year timeframe.

"As we've seen in some countries, the risk of fragmented governing coalitions is that they could result in loose fiscal policies," Vartapetov said.

"In our baseline, we expect gradual consolidation in the medium term, supported by a reasonable growth outlook and policy effort, but risks to this baseline remain. Romania has a track record of weaker fiscal outcomes compared to targets."

(Reporting by Gergely Szakacs; editing by Barbara Lewis)