Tabakovic: S&P has confirmed adequacy of Serbia's policy

BELGRADE - The fact that, in spite of all global uncertainties it is faced with, Serbia is still a notch away from investment grade is another confirmation that it pursues an adequate economic policy against the backdrop of a multidimensional crisis that has been going on for more than three years, National Bank of Serbia (NBS) Governor Jorgovanka Tabakovic said in a comment on a recent Standard & Poor’s report.

The credit rating agency has affirmed Serbia’s rating at BB+, with a stable outlook, despite the still pronounced international risks and the consequences of geopolitical developments for the global economy, the NBS said in a statement.

"Standard & Poor’s underlined that, by lifting the key policy rate gradually, Serbia prevented a further spread of inflationary pressures, and that medium-term inflation expectations remained largely anchored thanks to the monetary policy credibility, monetary tightening and the maintained relative stability of the exchange rate. Inflation is expected to recede in the second half of the year.

The agency underlined the proven credibility of Serbia’s overall economic policy, its favourable long-term growth prospects, fiscal discipline, lower financing needs and the downward trajectory of public debt. It also noted the high FDI inflows, which played an important role in expanding export capacity and increasing their diversification, as well as in boosting the country’s FX reserves, which are projected to remain adequate even in the medium-term," the central bank said.

The agency also said the Serbian financial sector was "well-capitalised, liquid and profitable" and that the share of NPLs in total loans was at a minimum of 3 pct.

"By preserving the exchange rate stability and avoiding sudden key policy rate hikes, we have managed to anchor inflation expectations and at the same time maintain full financial stability in the country. Also, inflation growth has been halted, and it is particularly important that business, investment and consumer confidence has remained at a very high level. Thanks to this, we continue to post growth in employment, investment, export and total GDP," Tabakovic added.

"As preconditions for obtaining investment grade going forward, Standard & Poor’s lists accelerated economic growth and further decrease in the fiscal and current deficits, which – as in the case of other economies – will also depend on the further course and economic effects of the conflict in Ukraine and overall geopolitical movements," the NBS said.

"Coordination of monetary and fiscal policies in the previous years, consistency and continuity in economic reforms, transformation of the Serbian economy and confidence of domestic and international investors and institutions have secured preconditions for obtaining investment grade in the coming period and for formally joining the group of countries to which we already belong according to many indicators. I am certain that, had there been no pandemic and the Ukraine conflict, Serbia would have been an investment grade country for quite some time already," Tabakovic concluded.