Standard & Poor’s (S&P) has affirmed Serbia’s credit rating at BB+, one notch below investment grade, despite pronounced uncertainties in the international environment. S&P has also maintained a stable outlook, confirming the domestic economy’s built-up resilience to numerous global challenges, the National Bank of Serbia (NBS) announced.
In particular, S&P highlights Serbia’s credible macroeconomic policy framework, as well as adequate foreign exchange reserves as an important buffer against shocks coming from the external environment. Significant factors behind the decision to affirm Serbia’s rating include the credible monetary policy pursued by the National Bank of Serbia (NBS) and the country’s moderate public debt levels. According to the agency, Serbia’s banking sector is well-capitalized, profitable and liquid, whereas non-performing loans are at a historical low.
S&P states that the effect on the Serbian economy from the Ukraine conflict and associated economic slowdown in Europe appears to be contained. Serbia’s medium-term growth prospects remain resilient, supported by its growth model that is driven by export-oriented sectors.
When it comes to energy, S&P states that Serbian gas storage levels are full for the winter and its oil imports are diversified, which means that Serbia can source oil from other destinations as well.
The agency highlights the new stand-by arrangement agreed upon with the IMF as an important factor of commitment to advancing structural reforms.
The report also states that, after rising temporarily to 3-4% of GDP amid the global energy crisis, the fiscal deficit will quickly resume a downward path.
As a consequence of the powerful surge in global energy prices, the current account deficit expanded but continued to be covered by record-high FDI inflows. Over the last years, FDI inflows have strengthened and diversified Serbia’s export base, while also helping to mitigate external risks and build up foreign exchange reserves.
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