Fitch Agency revised Macedonia’s outlook to positive, affirming the credit rating at BB

3rd February 2018, Skopje (MIA) - Fitch Agency announced that it has revised Macedonia's outlook from negative to positive, at the same time affirming the credit rating at BB.

Political stabilization and improvement of the key international relations contributed to the outlook upgrade, and what was especially noted was the progress of Government’s “Plan 3-6-9” reform programme, the local elections outcome, confirming the reform mandate, as well as the Special Prosecutor’s Office actions pertaining to the illegal wiretaps. Furthermore, Fitch stated that the diplomatic signals as regards resolution of name-related dispute were positive, pointing out that Macedonia hopes to secure a positive recommendation from the European Commissions and commencement of the negations in the course of 2018.

Positive outlook revision also reflects the ratings that the 2017 central government budget deficit was 2.7% of GDP, below the government’s Supplementary Budget target of 2.9%. Thereby, what was stressed was the enhanced confidence in Government's commitment to fiscal targets, as well as the projections for gradual reduction of the deficit to 2% in the medium-term. Fitch estimates general government debt was 39.2% of GDP in 2017, while public debt accounted for 47.4% of GDP, , being the first decline of the public debt after continuously rising for 9 years from 23% of GDP in 2008.

Rating affirmation at BB was also influenced by the maintenance of low inflation and financial stability, underpinned by a credible and coherent macroeconomic and financial policy, consistent with the longstanding exchange rate peg to the euro.  Fitch forecasts GDP growth to 0.5% in 2017, amid high growth in the last quarter of the year, based on a pick-up in industrial production, exports and credit growth. Furthermore, it is expected for GDP growth to pick up to 3.1% in 2018 and 3.3% in 2019, as a result of the positive effects from the political situation on both the economic expectations and the economic activity.

Fitch stated improvement in governance standards and further reduction of political uncertainty, as well as implementation of a  credible medium-term fiscal consolidation programme  consistent with a stabilization of the public debt/GDP ratio, may lead to the rating upgrade. Despite that, re-emergence of political instability, fiscal indiscipline or contingent liabilities, as well as widening of the current account deficit could result in lowered ratings.