The Serbian Finance Ministry said on Thursday that the Moody’s ratings agency kept the country’s credit rating at the level of Ba3 with positive prospects.
A press release quoted Moody’s as saying that it expects Serbia to achieve significant growth of six percent and a full economic recovery in 2021 despite risks.
According to the Finance Ministry, the agency’s annual report which was published on Wednesday evening said that the positive prospects for a further rise in Serbia’s credit rating are even more significant bearing in mind the fact that this is a time of a great economic crisis, drop in the global economy and increased risk caused by the coronavirus pandemic. The Ministry said that the government’s successful monetary policy measures over the previous few years resulted in stable and low inflation.
In a separate press release, Moody’s said that “Serbia has executed a strong fiscal consolidation drive which provides a degree of resilience to the expected deterioration in public finances in the context of the pandemic”. “The economy benefits from a generally more stable macroeconomic environment that will support robust growth potential after the coronavirus-induced recession,” it added.
“The credit profile of Serbia (Ba3 positive) is supported by its relatively high income compared to peers alongside a relatively large and diverse manufacturing sector which helps to attract sizeable foreign investment,” Moody’s Investors Service said in the report.
It warned that “a challenging business environment arising from weaknesses in the rule of law and a still sizeable informal sector weighs on growth potential”. “Furthermore, the large, albeit gradually declining, share of foreign-currency government debt and the banking sector’s high degree of euroisation also pose credit risks. Contingent liabilities from the state-owned enterprise sector still remain significant and the pace of reforms to contain these risks remains slow,” it added.
“The positive rating outlook reflects recent improvements to debt metrics and Serbia’s robust medium-term growth outlook. Upward pressure on Serbia’s rating could arise if Moody’s concludes that, over the medium-term, the government’s policy stance will continue to support a downward trend in government debt. Conversely, the outlook could be stabilised if Moody’s concludes that Serbia’s fiscal strength would be materially eroded over the medium-term, or from the emergence of a large and sustained current-account deficit which would be increasingly difficult to finance,” the report said.
