In today’s report, the Standard and Poor’s agency confirmed the assessment of Serbia’s credit rating at the level of BB + and kept stable prospects for its further increase, the Ministry of Finance announced.
Consistency in the implementation of responsible economic policy has given results, so Serbia still remains in the group of rare countries whose credit rating has not been reduced in 2020, it is stated in the announcement.
The agency states that thanks to successfully implemented structural reforms and measures of fiscal discipline and consolidation, good bases for sustainable economic growth have been created and that Serbia has entered the crisis caused by the pandemic, ready and with well-balanced finances.
It is pointed out that the reduction of public debt in the previous period created enough fiscal space to be able to support additional borrowing for a package of economic support measures and economic recovery from the negative impact of the pandemic, which also slowed the economic decline of the Serbian economy.
In addition, it is pointed out that successful monetary policy measures implemented in previous years have resulted in stable and low inflation, which is at a level of less than two percent.
The report states that the potential economic damage from the shock caused by the pandemic has been mitigated thanks to a joint package of measures of support from the Government of Serbia and the National Bank of Serbia, which amounts to almost 13 percent of the gross domestic product.
Measures aimed at preserving the productive capacity of the entire economy, maintaining the living standards of the population and providing liquidity to all economic entities, significantly helped mitigate the immediate consequences of the pandemic and create conditions for faster economic recovery and dynamic growth in 2021, the report states.
It is added that the National Bank of Serbia reduced the reference interest rate by a cumulative 100 basis points to 1.25 percent during 2020 and increased the liquidity of the banking sector through swaps and repo transactions.
Due to the need to finance measures to support the economy and citizens in order to reduce the impact of the crisis, there was only a temporary slight increase in the share of public debt in gross domestic product, and public debt is expected to return to the previous declining trend.
Standard & Poor’s states that foreign direct investment in the previous period was more than enough to fully cover the current deficit, and that over the past decade, foreign investment in Serbian production has resulted in stronger revenues and diversification of the export basket.
The agency states that the banking system and the dinar exchange rate have remained stable, that foreign exchange reserves are at a record level and that the level of problem loans has been reduced from 22 percent in 2015 to 3.40 percent at the end of September this year.
Standard & Poor’s estimates a smaller economic decline of 1.5 percent this year, compared to the 3.5 percent projected in May, and predicts that Serbia will achieve significant economic growth of 4.5 percent next year.
If the increase in the inflow of foreign direct investments continues, as well as the improvement of the balance of payments, the growth of export earnings and the increase in the level of foreign exchange reserves, despite all risks, conditions would be created for increasing Serbia’s credit rating, Nova reports.
