Serbia’s rating is a step away from investment grade according to Standard & Poor’s
The credit rating agency Standard and Poor's has confirmed the credit rating of the Republic of Serbia at the level of BB+ and maintained a stable outlook for its further improvement. This places Serbia one step away from attaining an investment-grade rating, despite the unfavorable effects of the conflict in Ukraine, slowing external demand, and still relatively high, although decreasing, global inflation.
The credit rating confirmation results from a moderate level of public debt and a credible monetary policy framework. The agency notes that the credit rating could be improved if the negative consequences of geopolitical uncertainties are kept under control, and there is accelerated economic growth. It is expected that in 2024, real GDP growth of 3.3% will be achieved, following improvements in global economic conditions, domestic investments, and consumption, after the current slowdown caused by challenging financial conditions and high inflation.
The government of the Republic of Serbia is estimated to meet its targeted budget deficit of 2.8% of GDP this year, compared to the initially planned 3.3%. This revised deficit level is primarily attributed to reduced expenditures and higher-than-expected revenues. Expenditure reduction occurred due to a decrease in energy subsidies to state-owned enterprises and lower global energy prices.
The agency notes that the government aims to continue fiscal consolidation, and from 2025, the budget deficit is expected to be in the range of 1-2% of GDP.
Furthermore, a high influx of foreign direct investment will enable further increases in foreign exchange reserves, already at a historic high, contributing to a reduction in public debt and strengthening exports.
Inflation will significantly decrease in 2024, thanks to the strict monetary policy of the National Bank of Serbia and a stable exchange rate of the domestic currency against the euro, approaching the target range of 3% +/- 1,5% in the second half of 2024.
The stable forecast for the upcoming period indicates that the Republic of Serbia will continue to pursue responsible monetary and fiscal policies, focusing on further reforms, investing in infrastructure projects, maintaining exchange rate stability, stability of the banking sector and public debt, and despite numerous challenges, preserving economic growth and stability.
