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S&P affirms Serbia at 'BB', outlook positive

Author Radomir Ralev
S&P affirms Serbia at 'BB', outlook positive gary yim/

BELGRADE (Serbia), June 17 (SeeNews) - S&P Global Ratings has affirmed its 'BB' long-term and short-term sovereign credit ratings on Serbia with positive outlook, Serbia's central bank, said.

The positive outlook reflects Serbia’s solid economic expansion outlook, a prudent fiscal stance and the government’s commitment to implementing the reforms supported by the policy coordination arrangement with the International Monetary Fund (IMF), the central bank, NBS, said in a statement on Saturday.

"S&P stresses in particular the improved credibility of the NBS monetary policy and the preserved price and financial stability as the factors that lie at the core of the positive outlook," NBS said quoting a report by the credit agency issued late on Friday.

S&P underlines the central bank’s operational independence and the steps it has taken to augment the credibility and the effectiveness of its monetary policy in the inflation targeting regime. As assessed by S&P, inflation will stay within the target tolerance band of 3±1.5% in the medium run, the central bank noted.

The credit agency judges Serbia’s GDP growth prospects to be sound, despite the negative impact from the softening euro area growth in the short run. Serbia’s growth is expected to continue to be led by domestic demand, supported by investment, buoyant labour market and credit growth, the central bank said.

"A positive contribution will also come from strong export growth. The potential for further acceleration of economic growth is seen in continued structural reforms and rising labour force participation, backed by the sustained EU accession process and the Policy Coordination Instrument arranged with the IMF."

Serbia has made a significant narrowing in internal imbalances and the government’s longstanding commitment to fiscal consolidation, which resulted in a general government budget surplus in 2018, and in a further reduction of public debt, while declining interest rates played an important role in the process, the central bank said. 

In December, S&P affirmed its long-term foreign and local currency sovereign credit ratings on Serbia at 'BB' and raised its outlook to positive from stable. The outlook revision reflects Serbia's solid economic growth outlook and largely prudent fiscal stance, amid prospects for delivery of further growth-enhancing reforms under the new non-financial 30-month policy-coordination arrangement with the IMF that the government signed in July 2018, S&P said back then.