Serbia’s risk premium has been steadily declining since late 2012, according to an NBS analysis released as part of a monthly central bank inflation report.
The Emerging Markets Bond Index (EMBI) is the most commonly used risk assessment for emerging countries such as Serbia. EMBI data, based on Eurobonds in dollars, tracked and published by J.P. Morgans for Serbia have been available since April 2005, the analysis points out.
If we compare the movement of this index with the global EMBI and EMBI Europe, it can be concluded that the risk premium of Serbia until the beginning of 2014 was generally above the average risk premium for all emerging and European emerging countries, and that from 2014, below them.
It can also be seen that the risk premium of Serbia until 2014 almost completely follows the trends of the global and European risk premiums (the correlation coefficient was 95%), and since then the correlation between the domestic and global risk premiums is no longer as strong (the correlation coefficient less than 50 percent), according to an NBS analysis.
At the same time, when the global risk premium increased during the period of the world economic crisis (2008-2009) and the public debt crisis in the euro area (2011-2012), the risk premium for Serbia increased even more than the average for emerging countries, which indicated to a lesser willingness of investors to invest in Serbia.
The risk premium for Serbia has been decreasing almost continuously since the end of 2012, so at the end of 2019 it was reduced by 372 points (from 391 to 19 points), which is the largest decrease among the countries of the region, in the analysis.
Serbia’s risk premium at the end of 2019 was 258 points lower than the composite global index EMBI Global, which indicates that investing in Serbia is now significantly less risky than the average of emerging countries, according to investors.
In the same period, the global risk premium of emerging and European emerging countries is at a slightly higher level than in 2012, indicating that domestic factors contributed primarily to the reduction of Serbia’s risk premium, primarily the achieved macroeconomic stability and reduced internal and external imbalances, NBS analysis points out, Kamatica reports.
