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The Government of the Republic of Serbia

In the service of citizens

Serbia keeps credit rating at BB+

Belgrade, 15 December 2020

The Ministry of Finance stated that the rating agency Standard and Poor's, in a report published on 14 December, confirmed the credit rating of the Republic of Serbia at BB+ and kept stable prospects for its further increase.

Consistency in the implementation of responsible economic policy has yielded results, and thus Serbia remains in the group of rare countries whose credit rating has not been reduced in 2020.

The agency states that thanks to successfully implemented structural reforms and measures of fiscal discipline and consolidation, good bases for sustainable economic growth have been created and that the Republic of Serbia has entered this crisis ready and with well-balanced finances.

It is pointed out that the reduction of public debt in the previous period created enough fiscal space to be able to support additional borrowing for a package of economic support measures and economic recovery from the negative impact of the pandemic, which also slowed the economic decline of the Serbian economy.

Also, successful monetary policy measures implemented in previous years have resulted in stable and low inflation, which is below 2%.

The report states that the potential economic damage from the shock caused by the coronavirus pandemic has been mitigated thanks to a joint package of measures of support from the government of the Republic of Serbia and the National Bank of Serbia, which amounts to almost 13% of GDP.

Measures aimed at preserving the production capacities of the entire economy, maintaining the living standard of the population and providing liquidity to all economic entities, significantly helped to mitigate the immediate consequences of the pandemic, but also to create conditions for faster economic recovery and dynamic growth in 2021.

In addition, the National Bank of Serbia reduced the reference interest rate by a cumulative 100 basis points to 1.25 percent during 2020 and increased the liquidity of the banking sector through swaps and repo transactions.

Due to the need to finance measures to support the economy and citizens in order to reduce the impact of the crisis in 2020, there was only a temporary slight increase in the share of public debt in gross domestic product and next year public debt is expected to return to the previous declining trend.

Foreign direct investment in the previous period was more than enough to fully cover the current account deficit.

In addition, Standard and Poor's states that during the past decade, foreign investments in Serbian production have resulted in stronger revenues and diversification of the export basket.

The agency states that the banking system and the dinar exchange rate have remained stable, that foreign exchange reserves are at a record level and that the level of problem loans has significantly decreased from 22 percent in 2015 to 3.4 percent of the total amount at the end of September 2020.

Standard and Poor's forsees a smaller economic decline this year of 1.5 percent, compared to the previously projected 3.5 percent in May, and that the Republic of Serbia will achieve significant economic growth of 4.5 percent next year.

If the increase in the inflow of foreign direct investments continues, as well as the improvement of the balance of payments, the growth of export earnings and the increase in the level of foreign exchange reserves, despite all risks, conditions would be created to increase the credit rating of the Republic of Serbia.