November 28 (SeeNews) - Serbia's general government fiscal deficit is expected to stand at 2.3% in 2016, amid continued increases in tax collection and reforms in the public sector, Moody's Investors Service said.
Supported by the acceleration of real GDP growth by 2.7% this year, versus 0.8% in 2015, Serbia's debt-to-GDP ratio is projected to stabilise at around 75% in 2016, Moody's said in a press release upon the release of a report on Friday.
However, Moody's notes that the past rapid deterioration in fiscal and debt metrics still poses challenges.
The "positive" outlook on Serbia's B1 rating reflects partly the systemic overhaul under the three-year IMF stand-by arrangement, which had yielded robust economic growth and significant fiscal adjustments. The high proportion of foreign-currency denominated debt adds foreign-exchange risk to the country's debt repayment profile, the credit agency said.
In 2016, the government managed to reduce public employment by more than 16,000 compared to end-2014, and made progress on the restructuring of large utilities and transport companies, without apparent effects on private consumption and unemployment.
That said, further progress in EU accession remains a target for Serbia, and four EU chapters have been opened since the start of formal negotiations in January 2014. Despite the strong commitment of the Serbian government, Moody's views the EU membership target of 2020 as being optimistic.
Downsizing the public administration and restructuring loss-making state-owned enterprises has been postponed to 2017. After the renewed electoral support provided to the government in the April election, Moody's notes that the political ability to push through those reforms will be a key factor for Serbia's creditworthiness.
EU accession remains a target for Serbia, and four EU chapters have been opened since the start of formal negotiations in January 2014. Despite the strong commitment of the Serbian government, Moody's views the EU membership target of 2020 as being optimistic.