S&P press release

The rating agency Standard and Poors has affirmed the credit rating of the Republic of Serbia at the level of BB, with the outlook been revised to positive, which means that there is an increased likelihood that ratings might go up to BB+ in the next 12 months.

According to the Standard and Poors, in 2018, real GDP growth is likely to reach a 10-year high of 4.2% or slightly above. The Serbian economy is likely to expand in 2019-2021 with average rates of 3.3% or higher, driven by stronger private sector consumption supported by expanding employment, wage growth, and a stable inflow of worker remittances. In the light of macroeconomic stabilization and higher investor confidence, higher inflow of FDI is also expected to boost economic growth.

The positive outlook balances the potential for a further improvement in Serbia’s external position and continued reduction of the public debt burden. Over the past few years, the government reversed the upward trajectory of public debt. In 2017 alone, debt to GDP dropped by about 10 percentage points, and the same trend continued during 2018. Fiscal reforms have led to stable public finances and a further reduction of public debt expected continuation of the implementation of the initiated reforms. One of the main goals in the coming period is to reduce the public debt below 50% of GDP.

The confirmation of the current credit rating of the Republic of Serbia by the Standard and Poor’s agency, reflects the expectation of the Agency that the current Government will continue with the implementation of fiscal and structural reforms programs. This is largely the result of a stand-by arrangement with the International Monetary Fund, which was successfully completed in February 2018.

Standard & Poor’s believes that the EU accession process as well as new policy-coordination arrangement with the IMF could help boost the growth of the private sector in Serbia and accelerate convergence of income with EU while maintaining macroeconomic stability. The Agency estimates that the deficit of the current account deficit will be, on average, at the level of 5% in the period from 2019 to 2021, which will contribute most to the existing foreign investment in the manufacturing industry, as well as improving the competitiveness of the manufacturing sector and the service sector.