May 20 (SeeNews) - Global rating agency Fitch said on Friday the latest delay of Macedonia's elections adds pressure on the country's 'BB+' sovereign rating.
"The negative outlook on the rating reflects the risks to political stability that emerged in 2015, as well as the rising debt-to-GDP ratio," Fitch said in a statement.
Earlier this week Macedonia's parliament decided to postpone indefinitely the June 5 early general elections which formed up as a one-man show after the opposition boycotted them.
The snap vote was part of an EU-brokered deal known as the Przino agreement, which aimed to solve a political crisis that started in January 2015 when SDSM leader Zoran Zaev accused the coalition government of the conservative VMRO-DPMNE and DUI of corruption, wiretapping illegally more than 20,000 people and covering-up a murder.
"Healthy economic growth has supported the rating (we forecast real GDP to increase 3.6% this year and next year). However, the uncertain political environment could affect economic activity, as was seen in August last year when the government adopted a supplementary budget and increased spending as growth slowed on rising political volatility," Fitch said, adding that despite shortfalls in VAT and personal income tax receipts, better-than-expected revenue performance kept the 2015 fiscal deficit within the supplementary budget's target of 3.6% of GDP.
Political uncertainty has increased government borrowing costs, the rating agency warned.
"Deficits are pushing up Macedonia's debt burden, and we forecast the general government debt ratio to rise to 41.1% of GDP this year, up from 38% at end-2015."
The continuing political crisis makes it less likely that a credible medium-term fiscal consolidation programme consistent with stabilising the ratio, and incorporating structural policy measures, emerges, according to Fitch.