In its report on December 10, the Standard and Poor’s credit rating agency improved the prospects for further increase of Serbia’s credit rating from stable to positive and confirmed the credit rating of the Republic of Serbia at BB +.
The Ministry of Finance announced that the Agency pointed out that in the next year, objective conditions will be created for increasing the credit rating to the investment level if the projected expectations of inflow of foreign direct investments, growth rate and share of public debt in gross domestic product are exceeded.
Structural improvements in the economy supported by economic policy measures have yielded results in the first half of 2021. This is one of the main reasons for the revision of the expected growth of the gross domestic product in 2021 to 7 percent, while in 2022 the growth of over 4 percent is projected. The Agency cites public investment and private consumption as the main drivers of growth.
-The high level of gross domestic product growth was contributed by several factors, primarily adequate and balanced support of fiscal and monetary policy, which made a significant contribution to mitigating the negative effects of the pandemic, rapid vaccination process, and the resilience of the manufacturing and construction sectors to the negative effects of the pandemic. – states the Ministry of Finance.
The measures aimed at preserving the production capacities of the entire economy, maintaining the living standard of the population and preserving liquidity, significantly helped, not only to mitigate the immediate consequences of the pandemic, but also to create conditions for dynamic growth and to save jobs.
– Thanks to timely, strong and adequate monetary and fiscal policy measures, the Republic of Serbia has managed to respond well to the crisis caused by the coronavirus pandemic, reduce and limit the negative effects of the pandemic and create a good basis for faster economic recovery, supported by high levels of private consumption.
The Agency’s report highlighted the continued strengthening of the banking sector, especially in terms of reducing the share of non-performing loans compared to previous years. It is also stated that the dinar exchange rate has remained stable, and that foreign exchange reserves are at a record high level.
Also, the Agency points out in the report that, after the increase in the fiscal deficit during the crisis in 2020 and 2021, there will be a balance of public finances and its significant reduction in 2022 to 3 percent of GDP and projects additional deficit reduction in the coming years.
Reducing the deficit will currently reverse only the temporarily growing path of public debt. During the next year, the share of public debt in GDP is expected to stabilize, and after that, its return to the downward trajectory.
The conditions of financing on the international and domestic market in 2021 were more than good, which the Government of the Republic of Serbia used and raised funds at very favorable rates. The surplus of accumulated funds collected during the past months will additionally reduce the share of public debt in the gross domestic product.
– Improving the prospects for increasing the credit rating is another confirmation of the good economic results that the Republic of Serbia has achieved in the previous period, and is a clear signal to potential investors to increase the security of investment in Serbia. Increasing economic growth, investment growth and higher employment create a favorable environment for further growth and development of economic activity – concludes the Ministry of Finance, Srbija Danas reports.
