Serbia has achieved a historic success—it has received an investment-grade credit rating from one of the world’s leading agencies for the first time in its history. This step marks a significant milestone in the country’s economic development, strengthens its position on the international arena, and opens new opportunities for attracting investments.
What is an investment-grade credit rating and why is it important?
An investment-grade credit rating is an assessment of a country’s creditworthiness provided by international rating agencies such as S&P, Moody’s, and Fitch. Achieving this rating signifies economic stability and reduced risks for foreign investors. For emerging markets such as Serbia, it’s particularly important, as an investment rating opens doors to broader access to international financial markets and lowers borrowing costs.
Details of the rating assignment
On October 4, 2024, the international rating agency S&P Global upgraded Serbia’s long-term sovereign credit ratings for both foreign and local currency to BBB- with a stable outlook. The agency gave Serbia an investment-grade rating for the first time. This achievement is the result of the country’s long-term efforts to stabilize its economy, strengthen public institutions, and reduce external risks. Previously, Serbia’s rating was at BB+ and this indicated high risks for investors.
Serbian President Aleksandar Vučić called this day ‘historic’ and emphasized that it marks ‘a turning point in the economic development of the country’. He noted that this success was possible thanks to the government’s persistent work in maintaining macroeconomic stability and improving the investment climate: “We have been working on this for almost ten years. Today, we can all proudly announce that Serbia has reached an important milestone in its economic development, as its credit rating has been raised to BBB. This means that, for the first time in history, Serbia’s international credit rating has reached investment grade.”
Finance Minister Siniša Mali also expressed satisfaction with the result. He believes this achievement will have a significant impact on the entire country: “Today, Serbia has been rated as an investment-grade country, which is well-deserved recognition from a reputable credit rating agency. This means that we are on the right path to continued economic growth and macroeconomic stability. I am proud of this great achievement.” The finance minister also reminded that all three major rating agencies had given Serbia positive outlooks for further credit rating upgrades in 2024. Siniša Mali expressed confidence that other agencies would soon confirm the country’s investment status.
Business opportunities in Serbia
Serbia has become the first country in the Western Balkans and the only EU candidate country to receive an investment-grade rating. This opens unique opportunities for foreign investors.
If you are considering expanding your business or starting a company in Serbia, now is the perfect time. The country’s high credit rating reduces risks and makes financial conditions more favorable. Registering a company, opening a bank account, and obtaining Serbian residency can help you effectively grow your business in the region. In addition, you would benefit from favorable conditions for international trade.
What led to the assignment of an investment-grade rating?
Several key factors allowed Serbia to achieve an investment-grade credit rating:
- Stable economic growth. In recent years, Serbia has shown steady GDP growth despite global economic challenges brought on by the pandemic and geopolitical crises. S&P forecasts real GDP growth of 4% in 2024 and the growth will continue in the following years.
- Low inflation and budget deficit control. The Serbian government successfully tackled inflation keeping it at an acceptable level (it fell to 4.3% in August). It also managed public spending in a way that led to a reduction in the budget deficit.
- Reduced external debt. Serbian authorities lowered the level of government debt relative to GDP by 2% bringing it to 48.4%. This fact should strengthen investors’ confidence.
- Reforms in public institutions. Improvements in public financial management and reforms supported by the current IMF program have aimed at addressing structural deficiencies in Serbia’s state-owned enterprises especially in the energy sector.
Last year, foreign direct investment exceeded $4.4 billion thus covering a substantial portion of Serbia’s current budget deficit.
Impact on Serbian economy and international reputation
Achieving an investment-grade rating opens many new opportunities for Serbia:
- Attracting foreign investments. An investment-grade rating demonstrates lower risk for investors, which boosts the country’s attractiveness for international investors.
- Lower borrowing costs. With the new rating, Serbia can borrow money on international markets at lower interest rates, which will make it easier to finance government and infrastructure projects.
- Strengthening economic stability. An investment-grade rating serves as an indicator to other countries and international organizations that can further improve trade and cooperation with Serbia.
The Serbian president also pointed out that investors have been interested in investing in the country for a long time, but they couldn’t do so because of the low rating. Now, ‘the doors are open for them’.
Receiving an investment-grade credit rating is a crucial step for Serbia. It opens new prospects for economic growth and enhances the country’s position on the international stage. This achievement results from long-term efforts to stabilize the economy and improve the investment climate. Serbia is moving forward and it will continue striving for further rating upgrades and strengthening its status as a reliable partner for international investors.
07 October 2024 