Rating agency “Moody’s” increased the credit rating of the Republic of Serbia to “Ba2” from “Ba3”, with stable prospects for further improvement.
The main factors that contributed to the improvement of the credit rating are the resilience of the Serbian economy to the consequences caused by the coronavirus pandemic, stable level of medium-term growth, as well as expectations that fiscal consolidation measures of the Government of the Republic of Serbia will continue to be above the average.
The Minister of Finance in the Government of the Republic of Serbia, Sinisa Mali, pointed out that Serbia is one of the few countries in the world that managed to increase and not reduce the credit rating in the conditions of the corona virus pandemic.
– In the conditions of great uncertainty and during the world economic crisis, we have shown great responsibility and with a comprehensive package of assistance we have provided support to both the economy and the citizens. We saved jobs, preserved production capacities, and sent a strong signal to everyone in the world that Serbia is still a stable country, with a responsible economic policy – Mali underlined.
Mali added that the good news is not a surprise, but a confirmation of expectations and good results in previous years.
– International investors are interested in our capital market and our bonds, which get a sign of reliability and liquidity. Investors already see us as an investment destination, so our bonds are already valued on the market at a higher rank. We are approaching the investment rating at an accelerated pace, which will be a great achievement for our country, but also important news for our businessmen and citizens – said Mali.
According to the agency, the average growth rate in the period 2018-2019. It amounted to 4.4%, while the decline in GDP in 2020 reached only 1.0%, which is significantly better than all countries in the group with a “Ba” rating.
The improvement of the credit rating in very unstable circumstances, due to the pandemic of the COVID-19 virus, is a huge confirmation of the economic progress and results achieved by the Republic of Serbia with the continuous application of fiscal consolidation measures, the agency’s report states.
– Our businessmen will benefit from such results achieved by Serbia, because the interest rates for loans they take from banks will be significantly lower and they will be able to enter strong investment cycles, without fear of expensive borrowing. That way, they will have the opportunity to invest more money in their business and create new jobs – said Mali.
The decision to increase Serbia’s credit rating was made on the basis of a stable economic policy, aimed at further strengthening macroeconomic indicators and reducing public debt after the pandemic.
The arrangement with the IMF also made a significant contribution to the achieved macroeconomic stability. Under the program, Serbia has made progress in reducing fiscal risks stemming from the SME sector and has successfully implemented a privatization program.
In its report, the agency emphasizes the fiscal discipline of the Government of the Republic of Serbia and its commitment to fiscal consolidation. Fiscal consolidation measures, implemented in recent years, have contributed to the creation of additional fiscal space to respond to the coronavirus pandemic.
The Agency estimates that the trend of GDP growth will continue in 2021, with a real increase in GDP by 4.7%, due to the recovery of domestic demand, normalization of economic activity due to the rapid vaccination process, and significant capital investment planned in 2021.
It is important to note that the Republic of Serbia entered a pandemic with stable macroeconomic indicators: low and stable inflation, stable exchange rate, adequate level of foreign exchange reserves and balanced growth, supported by increased economic diversification, which contributed to providing a package of fiscal measures at the beginning of the pandemic, conducted by the Government of the Republic of Serbia, is the largest in the region, with about 12.5% of GDP in 2020.
The growth of public debt in 2020 is assessed as temporary, because it arose as a consequence of increased costs due to the need to finance measures to support the Serbian economy and citizens in order to reduce the impact of the crisis caused by the “COVID-19” pandemic. Nevertheless, the share of public debt in GDP remains below the projected level below 60%, the share of public debt in gross domestic product at the end of 2020 was 57.4%, at the central level of the state, or 58.2% at the level general states. It is expected that the public debt will remain at approximately the same level in 2021, while the recovery and return of the debt to its declining path is expected as early as 2022, as it was in the period before the crisis.
The report of the Agency also states as extremely positive the fact that at the level of the general government, the share of interest in total revenues was kept at a level significantly lower than the average for countries with “Ba” rating, and especially praised the share of debt in budget revenues at an extremely low level, specifically at the second lowest level of the average for countries with a “Ba” rating, Novosti reports.
