01 April 2020
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Despite the COVID-19 pandemic, Serbia rated “BB+ with stable outlook” by Fitch Ratings

As pessimistic economic forecasts, caused by the COVID-19 pandemic, are pouring in suggesting that a global recession is inevitable, many states are attempting to implement economic and monetary measures to minimize the effects of the current humanitarian and economic crisis as much as possible.

Serbia is no exception, in this regard. Indeed, due to the economic and monetary measures it has decisively implemented in the wake of these extraordinary circumstances, Serbia managed to maintain a positive credit rating with Fitch Ratings, one of the “Big Three” global credit rating agencies.


Positive credit rating well-deserved, Fitch Ratings says

In its press release issued on March 27, 2020, Fitch Ratings confirmed Serbia’s Long-Term Foreign-Currency Rating at “BB+ with a Stable Outlook”.

Increased foreign exchange reserves managed by the National Bank of Serbia (“NBS”), fiscal discipline and favorable situation of public finances were identified by Fitch Ratings as main drivers behind the positive assessment, especially in light of the COVID-19 pandemic. Moreover, lower foreign-exchange-denominated public debt, energy prices and relatively low participation of the tourism sector in Serbia’s GDP were also found to contribute to Serbia’s resilience to the ongoing crisis and would speed up its economic recovery once the pandemic has passed.

In its March 27, 2020 press release, Fitch Ratings specifically applauded the NBS for its responsible conduct.

In fact, Fitch Ratings stated that measures implemented by the NBS during 2019, aimed at preserving low inflation rate at 1.9% while preserving foreign exchange rate stability, were factors that lead to Serbia’s readiness to tackle the economic implications of the pandemic head-on.

Furthermore, Fitch Ratings applauded the banking sector for being liquid and well-capitalized, while especially praising the NBS for cutting policy interest rates to 1.75% and introducing a moratorium on payment of loans and financial leasing instruments for 90 days, to reduce the burden on the economy and citizens during the state of emergency in Serbia.


Wrapping up with a warning

Despite Serbia’s overall favorable credit rating, Fitch Ratings nevertheless noted that an economic drop and negative financial situation is inevitable in Serbia in the second quarter of 2020, given the state of affairs on the global market. In fact, Serbia’s economy, though open, is small and exposed to the Eurozone, which leaves it very susceptible to spill-over effects of the potential financial crisis in the EU.

However, thanks to the decisive measures implemented by the Serbian authorities and the NBS in order to preserve economic and fiscal stability, Serbia’s economy should quickly recover from the unfavorable second quarter and should end the year with an overall positive performance. Based on these assumptions, Fitch Ratings amended the previous projection of growth of Serbia’s GDP in 2021, and raised it by 2.2 percentage points to 5.8%, as investments are expected to flow in and the labor market is expected to improve, leading to increased consumption rates.


For more information, please contact us via covid19@geciclaw.com