Fitch Affirms Republic of Serbia credit rating at BB+, with a Stable Outlook, regardless COVID-19 crises
Despite the coronavirus crisis, which has left an impact on the world economies, credit rating of the Republic of Serbia stayed unchanged at ‘BB+’ with a stable outlook for further improvements.
As Fitch Ratings notes, the well-balanced budget for 2020, the fiscal discipline and central government deposits are creating enough space for a post-crisis reactions.
The resistance of credit rating of the Republic of Serbia during the coronavirus is based on small impact of truism, higher level of foreign exchange reserves, and positive contribution of low energy prices and balanced non-resident holdings of government securities.
Fitch Ratings remarks that investment growth in the last quarter of 2020 was significant and it remained strong in the beginning of this year. Also, inflation stayed low and stable at the level of 1.9% in February 2020.
Fitch Ratings sees аs positive result that the level of foreign exchange reserves increased by EUR 2 billion, from EUR 11.4 billion in February 2019 to the level of EUR 13.5 billion in February 2020.
Significant declining trend of the general government debt in the past five years was positively evaluated by the Agency. The general government debt has fallen for 18.3 pp. in the period from 71.2% at end-2015 to 52.9% of GDP at end-2019.
Fitch Ratings highlighted significant progress in improving tax administration and public financial management.
As Fitch Ratings notes, remarkable improvement has been done in the banking sector. The level of NPL ratio has fallen from 5.7% at end-2018 to the level of 4.1% at end-2019.
Agency forecast that GDP growth in 2021 will be at the level of 5.8%, which is for 2.2 pp. higher then previous forecast, and it will be supported by increasing investments, private consumption recovery, better conditions in labor market and a recovery in external demand.
Thanks to the fiscal policy measures and disciplined work of the Government, Agency forecast a general government deficit at the level of 0.3% of GDP in 2021.
Agency also highlighted exceptional commitment and hard work made by the Government of the Republic of Serbia, which puts extra efforts to keep current economic politics and implement structural reforms, which are required for the further credit rating improvements.