Standard and Poor’s revises Serbia’s credit rating from BB to BB+

Standard & Poor’s (S&P) said it has raised its long-term foreign and local currency sovereign credit ratings on Serbia to ‘BB +’ from ‘BB’ with a positive outlook.

“We were able to raise our rating on Serbia in the next 12 months if FDI continues supporting exports and GDP growth, also boosting its foreign exchange reserves, despite mutated growth outlook for the country’s key trading partners,” S&P said in a statement on Friday.

This scenario would be further supported by compliance with the International Monetary Fund (IMF) programme’s reform targets, including those related to the introduction of more binding fiscal rules.

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S&P also said in its statement:

“The upgrade reflects Serbia’s resilient exports and investment-driven economic growth in the face of a challenging external environment. Serbia’s remarkable departure from its previous track record of weak and volatile growth has been accompanied by a reduction in macroeconomic imbalances: net public debt has gone down; net FDI has exceeded current account deficits supporting external deleveraging, and price and financial stability has been enhanced.

Serbia’s macroeconomic fundamentals have strengthened markedly over the past three years. We believe that solid domestic demand, including the benign investment outlook, should help the economy to weather ongoing weakness in Europe. In addition, Serbia’s monetary and fiscal policy settings have improved, partly due to past and existing arrangements with the IMF. This provides the authorities with room for policy manoeuvre in case of external demand deteriorates further.

Moreover, with global and regional financial conditions likely to remain highly accommodative this year and next, we believe that imminent risks to Serbia’s balance of payments from volatile capital flows have softened, as the government debt profile could further benefit from lower interest rates and longer maturities.

Our ratings on Serbia are backed by her educated workforce, favourable FDI prospects, government strong fiscal performance, moderate public debt, and credible monetary policy framework. The ratings are constrained by Serbia’s relatively weak institutional settings, low wealth levels, sizable net external liability position, and the banking sector’s extensive euroization – the renowned credit rating agency concluded.

(Al Jazeera Balkans, 15.12.2019)


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