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Fitch Ratings Affirms Serbia's Credit Rating at BB+ with a Stable Outlook despite Current Crisis Caused by the COVID-19 Pandemic

Fitch Ratings has maintained Serbia’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at ‘BB+’, thereby affirming Serbia's medium-term economic outlook despite the current crisis caused by the COVID-19 pandemic and the suppression measures implemented by governments throughout the world.
In its press release, Fitch states that the affirmed ratings and outlook reflect Serbia’s resilience to the crisis caused by the COVID-19 pandemic, underpinned by increased NBS FX reserves, low external government debt and balanced inflows and outflows from tourism.

The Agency also cites the maintained fiscal discipline and sound public finances, which provide fiscal space to respond to the new situation and accelerate recovery once the crisis is over. Fitch also expects the Serbian economy to benefit from the positive impact of lower energy prices.

After strong performance last year, the Serbian economy continued recording positive trends in early 2020. However, a contraction in economic activity is anticipated in the second quarter amid escalation of the coronavirus crisis. Being a small and open economy, Serbia is exposed to the euro area which is likely to face significant risks in the period ahead. Nevertheless, Fitch expects Serbia’s GDP growth rate at the level of the year to remain positive. After a temporary shock caused by the effects of the pandemic, Fitch forecasts Serbia’s growth in 2021 at 5.8%.

As regards the NBS’s scope of competences, in addition to the preserved low and stable inflation, increased FX reserves and maintained stability of the exchange rate, Fitch underlines the central bank’s prompt response to the impending crisis, including, inter alia, by cutting the key policy rate to 1.75% and introducing a moratorium on loan repayment. Once again Fitch assessed the banking sector to be liquid and well-capitalised, with the share of NPLs in total loans slashed to 4.1% at end-2019.

”This is yet another confirmation that Serbian economic policy makers were right in being so firmly committed to maintaining macroeconomic, financial and fiscal stability at all costs“, stressed Governor Tabaković.

”The results of such commitment are now reflected in the maintained economic outlook for Serbia and the fact that economic policy makers have both sufficient resources and instruments to respond to this unprecedented international economic shock“, added the Governor.

Governor Tabaković underscored that the NBS also began applying additional measures in support of liquidity management and that it provided to banks RSD 40.1 bn this week through direct repo auctions and FX swap auctions, with a view to sustaining credit and overall economic activity in these extraordinary circumstances.

Governor's Office