NBS: Standard and Poor’s Affirms Serbia’s Credit Rating at BB+

Standard & Poor’s (S&P) has affirmed Serbia’s credit rating at BB+, one notch below investment grade, despite pronounced uncertainties in the international environment. S&P has also maintained the stable outlook, confirming the domestic economy’s built-up resilience to numerous global challenges, the National Bank of Serbia (NBS) announced.

In particular, S&P highlights Serbia’s credible macroeconomic policy framework, as well as adequate foreign exchange reserves as an important buffer against shocks coming from the external environment. Significant factors behind the decision to affirm Serbia’s rating include the credible monetary policy pursued by the National Bank of Serbia (NBS) and the country’s moderate public debt levels. According to the agency, Serbia’s banking sector is well-capitalized, profitable and liquid, whereas non-performing loans are at a historical low.

– The S&P’s latest report is yet another confirmation of the sound results achieved by Serbia in tackling the multifaceted global crisis. By taking measures and acting proactively, in full coordination with other economic policy makers in the country, we have preserved the foundations of growth even in unprecedentedly challenging global circumstances. In this way, investment and consumer confidence have been maintained, as an important precondition of our economy’s further growth – commented Governor Jorgovanka Tabaković.

S&P states that the effect on the Serbian economy from the Ukraine conflict and associated economic slowdown in Europe appears to be contained. Serbia’s medium-term growth prospects remain resilient, supported by its growth model that is driven by export-oriented sectors.

When it comes to energy, S&P states that Serbian gas storage levels are full for the winter and its oil imports are diversified, which means that Serbia can source oil from other destinations as well.

The agency highlights the new stand-by arrangement agreed with the IMF as an important factor of commitment to advancing structural reforms.

The report also states that, after rising temporarily to 3-4% of GDP amid the global energy crisis, the fiscal deficit will quickly resume a downward path.

As a consequence of the powerful surge in global energy prices, the current account deficit expanded, but continued to be covered by record high FDI inflows. Over the last years, FDI inflows have strengthened and diversified Serbia’s export base, while also helping to mitigate external risks and build up foreign exchange reserves.

The report states that the NBS has contained the further spread of inflationary pressures by raising the key policy rate. S&P also highlights the importance of synchronized measures taken by the Government to cap the prices of basic foodstuffs. Anchored inflation expectations thanks to the NBS’s credibility, as well as subsiding global energy price pressures, are among the important factors which will help inflation converge back to the target tolerance band in 2024.

– We have taken and implemented measures to minimize the effects of the current crisis on our businesses and households. We used the buffers created in the prior period to offset the negative fallouts from the international environment. As a result, our foreign exchange reserves are record-high, the relative stability of the dinar exchange rate has not been threatened at any point, and our banking sector is stable and well-capitalized. All these results are an important pillar of defense against shocks, but they are also a part of the requirements to be met in order for Serbia to obtain the investment-grade rating which it deserves – concluded Governor Jorgovanka Tabaković.

Narodna banka Srbije Beograd

Standard and Poors

NBS

Jorgovanka Tabaković

credit rating of Serbia

BB plus level

raising of credit rating of Serbia

monetary policy

banking sector of Serbia

fiscal deficit

increase of energy prices

key policy rate