5th September 2020, Skopje – Standard & Poor’s Credit Rating Agency affirmed North Macedonia credit ratings at BB- with a stable outlook.
Affirming the credit rating reflects Standard & Poor’s view that despite the sharp economic contraction in 2020, North Macedonia has a fiscal space to manage the public finances. This is a result of the favorable longer-term growth potential, stabilization of the debt at moderate levels and access to funding through official and market sources.
As a result of the direct and indirect effects, the Agency projects for the contraction of Macedonian economy to account for 6% this year, which will be followed by 3.5% economic growth in 2021. They expect that the world GDP will contract by 3.8% this year, also projecting a 7.8% recession in the Eurozone, where most of North Macedonia’s trade partners are located.
Forecasts of the Credit Rating Agency are that the general government debt will account for 51% of GDP by the end of the year. The widened deficit financing needs due to the pandemic and the debt liabilities falling due are provided through the successful issue of the Eurobond on the amount of EUR 700 million and the loans from the IMF amounting to EUR 176 million, as well as the EUR 160 million facility from the EU. The aforementioned borrowing will cover North Macedonia’s budget deficit and debt repayments for the rest of this year, while also leaving the country with a cash buffer for the next year.
What was also noted in the Report was that the country got the green light to formally start EU accession talks, which could bring upside potential in terms of structural reform implementation, and thus development of the country as well. In addition, they observed improvements in political stability in the country in resent years.