Credit rating agency Fitch Ratings has left unchanged the Republic of Serbia long- and short-term foreign and local currency sovereign credit ratings at level 'BB'. The outlook is stable.

Serbia's ratings are supported by strong governance, human development and ease of doing business indicators. Presence of an IMF Policy-Coordinated Instrument (PCI) provides an anchor on reform and policy direction consistent with further strengthening of macroeconomic fundamentals and public debt reduction.

According to Fitch, Serbia is projected to grow by 4.3% in 2018 and 3.2% on average for period 2019-2020. Investment, household and government consumption, supported by positive developments in the labour market, are expected to be the main drivers of growth for 2018-2019.

As estimated by the agency, headline fiscal indicators continue to improve. A large and stable tax base, combined with contained government expenditure, will support fiscal surplus.  As a result, Fitch has left its 2018 forecast for a 0.5% of GDP fiscal surplus unchanged. For 2019, the government has agreed with the IMF to target a fiscal deficit of 0.5% of GDP.

The main drivers of positive trend are further fiscal consolidation resulting in a reduction in the general government debt to GDP, continued reduction in net external debt and stable FDI inflow. Serbia's general government debt ratio is forecast by Fitch to reach 54.0% of GDP in 2018, 4.7 percentage points lower than 2017's debt ratio of 58.7%. Persistent primary fiscal surpluses have helped put debt on a firm downward trajectory. 

This rating agency also assumes that the continued opening of chapters in EU accession talks and a new non-financing arrangement with the IMF (through a Policy Coordination Instrument) will serve an important anchor for maintaining fiscal and macro-economic stability.

Fitch Ratings sees a stabilization in the net external debt ratio in 2018-2019. In both years, net inflows of FDI are projected to cover current account deficits forecast at 5.6% of GDP and 4.9% of GDP, respectively.