Serbs see rating upgrade
BELGRADE – Serbia expects a credit rating upgrade later this year following the European Union’s decision to resume talks with Belgrade on closer ties and as a reward for solid macroeconomic indicators, the central bank said. The EU has invited Serbia for talks on Wednesday following the handover of a war crimes fugitive to The Hague tribunal. Talks were suspended in May 2006 as punishment for a lull in arrests. «Serbia’s credit rating of BB- remains the same as it was during the time when hard currency reserves were half what we have today, when inflation was more than double and foreign investment significantly lower,» Central Bank Governor Radovan Jelasic told a bankers’ forum. Over the past year, Serbia’s GDP has grown by 5.7 percent, inflation has fallen to a 15-year low, foreign investment has topped $4 billion, official currency reserves almost doubled to $12 billion and the dinar has remained fairly stable to the euro. The ratings could be upgraded only after credit rating agencies visit Serbia later this year, Jelasic added. «The credit ratings upgrade will mean more money for Serbia, longer maturities and lower interest rates,» he said. Fitch has Serbia’s short-term credit rating at B and the country ceiling at BB-. S&P affirmed its BB- long-term and B short-term rating in April, but noted the rating remained constrained by significant political risk. Last month, S&P said it would take a lot more than the resumption of EU talks to clinch the upgrade, such as Belgrade’s response to economic and political challenges, including the possible independence of its breakaway Kosovo province. It took three and a half months for rival parties to agree a coalition government after a Jan 21 election. The coalition, finally agreed on May 15, plans to submit a balanced budget for 2007 this month, setting out how they plan to handle trade and current account deficits, seen as the main medium-term risks for the economy. Growth this year is seen at over 6 percent. Headline inflation is planned at around 6 percent and foreign investment expected at $1.5-$2 billion. (Reuters)
