The credit rating agency Moody’s has upgraded Serbia’s long-term issuer and senior unsecured ratings to Ba3 from B1. The outlook has been moved to stable (from positive) – Serbian Ministry of Finance reports.
The main reasons for this upgrade were successful implementation of fiscal consolidation which has lowered the increase of debt burden in the national GDP, and structural reforms which have increased the resilience of the Serbian economy.
Moody’s goes on to say that positive fiscal trends in the country have resulted in the general government deficit reaching 1.4% of the national GDP which was far lower than the estimated 4% target for the 2016 budget. Furthermore, Serbia has recorded the 2.8% growth in 2016 which is the highest growth rate in the last eight years.
According to Moody’s estimates, the growth this year will be 3%, and will reach 3.3% in 2018. They also underline that, in 2016, Serbia had recorded the first primary budget surplus since 2005, “supporting a fall in the general government debt to GDP ratio to 74% of GDP at the end of 2016”.
Moody’s concludes its rationale behind the rating upgrade with: “Serbia could benefit from continued institutional improvements as part of the EU accession process. Progress on EU accession, which has continued through successive governments, has allowed Serbia to formally open 8 chapters out of a total of 35 since the formal start of accession negotiations in January 2014… The decision by the National Bank of Serbia to reduce the inflation target by 1pp to 3% (with a 1.5pp tolerance band) reflects the improved macro fundamentals, reduced inflation expectations and stronger credibility of the central bank. Moody’s expect an anchoring of inflation expectations at lower levels will help reduce longer-term interest rates and support potential growth.”
(Vecernje Novosti, 18.03.2017)
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