As part of its regular rating activities, Standard and Poor’s (S&P) rating agency maintained Serbia’s rating at BB+, with stable outlook going forward.
– It is particularly emphasized that the credible monetary policy was an important factor for maintaining the rating and its stable outlook. The central bank has operational independence, and has maintained low inflation for more than half a decade by using market-based monetary instruments – it is said on the website of the National Bank of Serbia (NBS).
S&P also stressed the importance of measures undertaken by the Government and the NBS, which adopted a package of economic measures amounting to 11% of GDP to contain the pandemic’s economic fallout. The key policy rate was trimmed, banks were provided additional liquidity via swap lines and repo auctions, and the relative stability of the dinar to the euro was preserved owing to FX market interventions.
To support the claim that Serbia is now more resilient to international shocks, S&P stated the considerably diminished reliance on financing from short-term portfolio investments and noted that FX reserves have reached a record high, as well as that the NBS has maintained inflation below 2% over the past six years.
S&P also emphasized that FDI in the past years was channeled mainly to tradable sectors, fully covering the current account deficit and reducing the need for sources of funding which increase the level of debt. The agency also stressed that FDI to the industry spurred export inflows and impacted on further export diversification.
The agency noted that banking sector stability with an average CAR of 22.7% in March this year was another rationale behind its decision to maintain Serbia’s rating and a stable outlook. The banking sector supported economic growth, and NPLs declined to 4% of the total in March, from a peak of 22% in 2015.