Serbia’s recent investment rating from Standard and Poor’s (S&P) is a significant milestone that economists believe will lead to cheaper borrowing for the country, ultimately benefiting the economy and its citizens. However, they emphasize that the real test of trust and interest in Serbian bonds will be revealed in the next bond auction.
Vladimir Vasić, a financial consultant, highlights that even a minor reduction in the risk premium—by just 0.1 or 0.2 percent—could result in substantial savings for the state, potentially allowing for an increase in the GDP growth forecast from 3.5 percent to 4.5 percent.
This upgrade opens doors for institutional investors who previously could not invest in Serbia due to its “junk” status. Nikola Avramović, senior director at Alvarez & Marsal, explains that improved borrowing conditions will not only lower financing costs but also broaden the pool of potential investors.
While the state is likely to reap the benefits of the investment rating quickly in financial markets, the impact on the economy and citizens may lag behind. Avramović notes that rating changes initially affect state debt, followed by the economy and finally the public.
Looking ahead, two other agencies, Fitch and Moody’s, need to affirm Serbia’s progress before the country achieves full investment grade. Avramović is optimistic that these agencies will align with S&P’s assessment, with Fitch expected to act in February.
The inclusion of Serbia in the investment rating category signals a level of trust among investors regarding the country’s moderate public debt and sound fiscal policies. This trust is crucial, as interest rates reflect not just economic metrics but also the psychological element of confidence in the country’s stability.
Currently, the yield on Serbian ten-year bonds stands at 6.975 percent. While a better rating does not guarantee lower interest rates, it positions Serbia more favorably compared to neighboring countries like Hungary and Romania, which have lower yields.
Overall, while the Public Debt Administration has no immediate plans for new bond issues, the coming months will reveal whether Serbia has genuinely earned the confidence of investors.
