Stable outlook for Serbia’s credit rating – Fitch Ratings revises growth forecast up to 4.3%

Fitch Ratings has affirmed Serbia’s long-term foreign- and local-currency issuer default ratings (IDR) at ‘BB' and the outlook is stable, announced the National Bank of Serbia (NBS).

As said in the NBS’ press release, the decision to maintain a stable outlook is based on the assessment that the direction of Serbia’s economic policy is consistent with further strengthening of macroeconomic fundamentals, improvement of the business environment and public debt reduction.

Inflation remains low and stable, and Fitch expects it to move within the target tolerance band in the coming period and to approach 3.0% in 2019. In addition to price stability, Fitch underscores improved banking sector indicators – higher asset quality and capital adequacy and the results achieved in terms of reducing NPLs which are currently at their lowest level since the NPL ratio is monitored.

The agency says that Serbia’s GDP growth in the first half of the year came in stronger than expected – 4.9% y-o-y, driven by investment and consumption growth. This has led Fitch to revise its growth forecast for 2018 up from 3.5% to 4.3%.

It is estimated that even against the backdrop of high government investment, Serbia’s public finances will record another surplus this year. Fiscal priorities in the 2019 budget are likely to include capital investment, a reduction in the labor tax burden, and measures to improve standards of living.

As regards public debt, Fitch assesses that the reduction of its share in GDP will continue this year.

The agency expects external imbalance to narrow down in 2019 as well, and the inflows of FDI to fully cover the current account deficit as so far.

Based on the results achieved and the expectations for the period ahead, Fitch assesses that the outlook for Serbia’s rating is stable, the NBS says in its press release.

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