SARAJEVO (Bosnia and Herzegovina), November 14 (SeeNews) – Nascent democracies and less-than-effective institutions continue to be the main weaknesses in the former Yugoslav countries, which are nevertheless on the road to becoming market economies, S&P Global Ratings said on Monday.
Low income levels and poor public finances, as well as the persistently inefficient allocation of resources illustrate the still large presence of the state in these countries, S&P said in a statement.
Very different monetary regimes in the countries are a manifestation of historical bouts of hyperinflation and institutional limitations, S&P said. It added that a history of low savings rates and correspondingly sustained current account deficits has resulted in external vulnerabilities.
"Today's monetary policy regimes across the region reflect institutional limitations and historical experiences", the agency explained.
Many of the current attributes of the former Yugoslav republics, such as their economic structures, political institutions, public finances, and monetary regimes were influenced and shaped by those of Yugoslavia and the federal state's violent breakup, S&P noted. It added that the region still carries part of the socialist legacy of political patronage, corruption and relatively weak checks and balances that weigh on institutional effectiveness.
Inefficient and bloated public administrations are another legacy issue that has been hampering the business environment, S&P also said.
All of the former republics of Yugoslavia are sovereigns rated by S&P Global Ratings, but most of the ratings are in the 'B' or 'BB' category, excluding Slovenia (A/Stable).
"With the exception of Serbia and Slovenia, we rate all of them lower than their initial ratings because of legacy issues that have weighed on creditworthiness over the years. As these issues remain the key rating constraints, addressing them will be key to improving creditworthiness", S&P Global Ratings credit analyst, Felix Winnekens, is quoted as saying in the statement.
Slovenia and Croatia are EU member states, Serbia and Montenegro are in the accession process, and Bosnia and Macedonia haven't yet started accession talks.
For the non-EU states, the process of convergence with the rest of Europe will be a long and rocky one, but some progress is being made under strong external anchors, such as the possibility of EU accession, S&P concluded.
On November 11, Standard & Poor's affirmed its B+ long-term credit ratings on Montenegro, with a negative outlook, saying that lower fiscal deficit in 2016 appears to be driven by lower-than-budgeted highway-related spending, which has offset increases in current expenditures.
The rating's agency affirmed Macedonia's long-term and short-term foreign and local currency sovereign credit ratings at BB-/B with a stable outlook in September, and judged that the country remains mired in a political crisis.
S&P kept Bosnia at B earlier that month, saying it expects the country's recent three-year arrangement with the International Monetary Fund (IMF) to alleviate government financing concerns and provide both an anchor and financial backing for reform implementation.
In July, S&P affirmed Croatia's BB long-term and B short-term foreign and local currency sovereign credit ratings, with a negative outlook. A month earlier, Slovenia's ratings were raised to 'A/A-1' on strengthening domestic demand and ongoing fiscal consolidation with a stable outlook.
At the time, Serbia was affirmed at BB-/B with stable outlook after snap elections.