Moody’s upgrades Serbia’s rating outlook

The rating agency Moody’s has upgraded the outlook on Serbia’s rating to positive from stable and affirmed the Ba3 rating, the National Bank of Serbia announces.

The Moody’s decision to upgrade Serbia’s rating outlook is supported by the accelerated reduction in the public debt-to-GDP ratio, as well as the country’s robust medium-term economic growth outlook.

Sound foundations based on the strengthening of domestic factors will additionally support the improvement in Serbia’s fiscal indicators.

According to Moody’s, in the period since the last rating upgrade in 2017, Serbia’s fiscal metrics have been improving at a faster pace than expected. The agency also noted continuous surpluses of the general government budget and has confidence that fiscal stability will be maintained in the period ahead – both on the back of strict control of current expenditure and economic growth and strong tax revenue generation.

Moody’s expects Serbia’s public debt to be below 50% of GDP by the end of 2020, which would make it a country with the fastest debt-to-GDP ratio reduction in five years (by 21 percentage points) compared to countries with a similar credit rating.

Moody’s expects that the manufacturing sector will continue to attract foreign direct investment, strengthening Serbia’s export potential. The rise in private investment, as an important component of sustainable growth, will be supported by strengthening of the banking sector, alongside a sharp reduction in non-performing loans achieved in the prior period.

As stated by Moody’s, since 2015 Serbia has implemented numerous structural reforms, including in the labor market and the public enterprises sector, creating solid foundations for sustainable economic growth. The agency particularly highlights the commitment of the Serbian Government to preserving the ongoing broad economic policy continuity, which is recognized as the key factor for a credit rating upgrade in the coming period.

Commenting on the outlook upgrade, NBS Governor Tabaković reminded that the achieved and preserved macroeconomic and financial stability, as well as political stability, have been one of the key factors behind the rise in employment and household disposable income.

– Along with continuous work on improving the business environment, grounds have been created in Serbia for sustainable economic growth – underlined Governor Tabaković.

– Much more favorable terms of funding and the strengthening of the banking sector, alongside a robust reduction in non-performing loans in the past period, will continue to be important drivers of private investment growth – added the Governor.

Reflecting on the Moody’s assessment that growth in Serbia is today more balanced and that domestic factors are a much stronger driver of growth, while Serbia’s export potential has strengthened further through increasingly higher investment in tradable sectors, the Governor underscored these will be the key factors behind a further rise in employment and the standard of living of our citizens.

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Jorgovanka Tabaković

credit rating of Serbia

upgrade of credit rating of Serbia

fiscal consolidation

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