21st July 2018, Skopje – Fitch Agency announced that it affirmed Macedonia’s crating at BB, with positive outlook.
Rating affirmation at BB was supported by a track record of coherent macroeconomic and financial policy, which underpins its longstanding exchange rate peg to the euro. The positive outlook reflects a more stable political environment that has increased economic confidence, realigned policy direction towards EU accession, and strengthened international relations.
In its Report Fitch noted that the Government has made credible progress acting on policy commitments since assuming office in June 2017., including the implementation of urgent initiatives set out under its “3-6-9” Reform Plan, also addressing issues in transparency and independence of public institutions. What is especially emphasized is the improvement of fiscal transparency, as well as the steps that has been undertaken to enhance the business environment for small- and medium-sized enterprises. What was also noted was the progress regarding the name issue, the EU Council’s decision on accession negotiations in June 2019, as well as NATO formal invitation for Macedonia to become its member after resolving the name dispute. Thereby, it is mentioned that the results of the referendum pose an uncertain political outlook.
Fitch assessed that the 2.7% GDP growth recorded this year will be intensified in the next two years, pointing out that continued political stability and gradual recovery in investment will increase medium-term growth. Furthermore, it assessed that fiscal finances remain broadly in line with the current BB category median. Thereby, Fitch is forecasting Macedonia’s fiscal deficit at 2.6% of GDP and general government debt at 42.3% of GDP.
Fitch’s assessment that risks to political stability are still assessed to be higher than in the current ‘BB’ peer group following the extended 2014-2017 political crisis. Furthermore, what could lead to the rating upgrade is an improvement in governance standards and further reduction in political risk, as well as implementation of medium-term fiscal consolidation programme consistent with a stabilisation of the public debt/GDP ratio. Contrary to this, what could lower the ratings is adverse political developments which could affect the governance standards, the economy and/or government policy direction, fiscal slippage or the contingent liabilities, as well as widening in the current account deficit.
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