NBS: Standard & Poor’s Affirms Serbia’s Rating a Step Away from Investment Grade

Standard & Poor’s decided to affirm Serbia’s credit rating at BB+, with a stable outlook, the National Bank of Serbia (NBS) announced. They add that Serbia is thus still one step away from investment grade, despite the unfavorable effects of the Ukraine conflict, the slowdown in external demand, and the still high, although declining, global inflation.

In its statement, Standard & Poor’s highlights that Serbia’s rating is supported by a moderate level of public debt and a credible monetary policy framework.

– Inflation will drop significantly from 2024, also owing to the credibility of the NBS, robust monetary policy and a stable dinar exchange rate against the euro. Inflation will enter the NBS target tolerance band of 3.0±1.5% in H2 2024 – says the report of Standard & Poor’s, as referred to on the NBS website.

The banking sector in Serbia is well-capitalized, profitable and liquid. In June, the capital adequacy ratio at the banking system level was as high as 22.3%, while the NPL ratio touched a historical low of 3.0%.

The share of the current account deficit in GDP will be more than twice lower than in the previous year, and net FDI inflows exceed it many times.

As the NBS reports on its website, in the medium term, the agency expects full coverage of the current account deficit by net FDI inflows.

– A moderate level of public debt, a high level of government liquidity and the expected reduction in the fiscal deficit and the share of public debt in GDP this and the following years – it says.

The agency points out that uncertainties from the international environment are still significant, but that Serbia manages to cushion external challenges with favorable domestic trends and adequate economic policies. The agency states that Serbia’s stable outlook is underpinned by the fact that the domestic economy continues to grow, even though economic activity is slowing down in the euro area countries which are our most important trading partners, such as Germany and Italy.

– The estimates of the rating agencies, along with a declining trajectory of inflation, confirm the adequacy of our decisions to raise the key policy rate in a gradual and well-calibrated manner. Also confirmed is the importance of record-high FX reserves for the country to obtain the investment grade, as well as the importance of the relative stability of the dinar exchange rate against the euro for the overall business environment in the country – concluded Governor Jorgovanka Tabaković.

Narodna banka Srbije Beograd

Standard and Poors

National Bank of Serbia

NBS

Jorgovanka Tabaković

credit rating of Serbia