Moody’s Investors Service, (Moody’s) has today upgraded Serbia’s ratings to Ba2 from Ba3.
The outlook has been changed to stable from positive. The key drivers of the decision to upgrade Serbia’s ratings are:1) Serbia’s relative economic resilience to the coronavirus shock and the country’s solid medium-term growth prospects;2) Moody’s expectation that Serbia’s fiscal metrics will continue to outperform Ba peers over the next few years.
The stable outlook balances Moody’s expectations that Serbia’s economy will return to growth this year and that the government debt-to-GDP will start declining in 2022 against the risks posed to the debt trajectory by the potential crystallization of contingent liabilities from SOEs and guarantee schemes, which are expected to remain contained though.
Concurrent to today’s rating action, Serbia’s local-currency country ceiling has been increased by one notch to Baa1 from Baa2.
The first driver of the new rating relates to Serbia’s relative economic resilience to the coronavirus shock and the country’s solid medium-term growth prospects. After averaging 4.4% in 2018-19, real GDP contracted by a preliminary 1.0% in 2020 due to the impact of the coronavirus shock.
Moreover, the structure of the economy adds to Serbia’s resilience, including the relatively low reliance on sectors particularly affected by the pandemic such as tourism and the favourable performance of the agriculture sector.
Moody’s expects that Serbia’s growth will resume in 2021, with real GDP expanding by 4.7%, driven by the recovery in domestic demand supported by the normalization of economic activity on the back of a relatively rapid vaccination rollout and significant public investment.
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This post is also available in: Italiano