The rating agency Standard and Poors kept the credit rating of the Republic of Serbia at the level of BB-, with the positive outlook for improving the credit rating.
According to the Standard and Poors the Serbian economy is likely to expand in 2017-2019, on the back of healthy investment inflows - mainly foreign direct investment (FDI) and stronger private sector consumption supported by expanding employment, wage growth, and a stable inflow of worker remittances.
Standard and Poor’s forecasts average fiscal deficits of about 1.9% on average over 2017-2020., which will require deeper reforms of the public sector and restructuring of several large state owned enterprises.
The confirmation of the current credit rating of the Republic of Serbia by the Standard and Poor's agency, reflects the expectation of the agency that the current Government will continue with the implementation of fiscal and structural reforms programs, and that the agency could raise its rating only if the government overperforms on its fiscal metrics while keeping the current account deficit in check.
Standard & Poor's believes that successful completition of the arrangement with the International Monetary Fund contributes to the preservation of investor confidence in the Republic of Serbia. The agency also estimates that the current account deficit, which amounted to 8.3% of GDP in the period from 2011 to 2014, will be on average at the level of 4% in the period 2017-2020. What will contribute the most are the existing FDI and the improved competitiveness of products and services.
In addition to declining current account deficits, this rating agency expects the composition of external financing to improve. It is expected that FDI net inflows will fully finance the current account deficits throughout 12-month forecast horizon.