17/02/2023
The Fitch rating agency affirmed Serbia’s rating at BB+, with a stable outlook. Serbia is only one notch below investment grade despite pronounced uncertainties in the international environment.
“The fact that the Fitch agency has affirmed Serbia’s stable outlook for obtaining an investment grade is another confirmation of our economy’s resilience to numerous global challenges”, highlighted NBS Governor Jorgovanka Tabaković.
In its report, Fitch emphasises it made this decision owing to a credible economic policy framework in Serbia, particularly in light of:
Fitch also underlines the once again confirmed resilience of the banking sector, a high and adequate level of FX reserves, full coverage of the current account deficit with FDIs and preserved overall stability of balance of payments movements, which is particularly important in an environment of high global energy prices and overall risks emanating from the international environment.
“In the course of 2022, goods and services exports rose above 30%, despite the slowdown in external demand. FDIs touched their record high of EUR 4.4 bn, employment and wages in the private sector increased, while the NPL ratio was reduced to a record low level of 3.0%. All this together confirms that we, as economic policy makers, have adequately responded to multi-dimensional shocks that all economies have been facing for three years already”, added Governor Tabaković.
As the agency notes, in late 2022 core inflation was lower than headline inflation by 5 bp, owing to the relatively stable dinar exchange rate against the euro and NBS’s adequate response. Three-year ahead inflation expectations of the financial and corporate sectors are anchored. The agency underlines that the country’s external position will improve, as a result of lesser energy needs owing to the built-up inventories and expectedly lower energy prices this compared to last year.
“It is also very important that, in the current volatile international circumstances, international institutions see future economic movements in a way that is very similar to our view. This particularly concerns inflation, which should already as of Q2, and perhaps even earlier, strike a downward path, only to start to decelerate more intensively as of the second half of the year”, stated the Governor.
In regard to public finances, the agency underscores that the 2022 performance was better than planned, and estimates that, despite elevated outlays for energy purchases, in the next two years the fiscal deficit will be narrowed to 1.4% and general government public debt to 50.5% of GDP.
“Such expectations of the agency in terms of future macroeconomic developments, along with the possibility that the outturn proves to be even better than projected, will be key for obtaining the investment grade”, concluded Governor Tabaković.
Governor's Office
