Fitch Agency affirmed the crediting rating of Macedonia

4th August 2017, Fitch Agency announced that it affirmed the existing credit rating of Macedonia, BBB with negative outlook.

Rating affirmation was influenced by the credible monetary and macroeconomic prudent policy, providing for long-term exchange rate stability, low inflation and stable economic growth. Economic growth for 2017 was revised to 2.3%, however, it was assessed that the Government establishment will result in better economic expectations and activity, subsequently providing for average growth of 3.2% in 2018-2019. Although the budget deficit will increase the pressure on the already upward trend of the government debt, accounting for 39.9% in 2017, it is projected to be significantly below the average of 49.5% of GDP of the countries with similar credit rating.

Fitch, in its report, has noted that the prolonged political crisis has been overcome by the establishment of the new Government. Thereby, it is assessed that the Government "Plan 3-6-9" for policies oriented towards the NATO and EU membership and restoring the confidence in the independence and transparency of the public institutions, faces significant challenges during the implementation process. They are primarily related to risks from possible disagreements in the government majority, as well as with risks from obstructions by the opposition, whereas the local elections will be initial test for the Government’s progress.

Affirmation of the negative outlook reflects the rating from Fitch that, despite the establishment of the new Government, there are still political risks for effective implementation of the economic policies, higher growth and advance towards the EU. Fitch stated that the credit rating improvement may be influenced by the significant reduction of the political uncertainty, as well as the implementation of the credible medium-term fiscal consolidation, being consistent with stabilization of the public debt share in GDP. Despite that, reoccurrence of the political instability, fiscal indiscipline or contingent liabilities, as well as expansion of external imbalance can also affect the deterioration of the credit rating.