One of the most reputable global credit rating agencies, Standard and Poor’s, has released its latest report on the Serbian economy, marking a historic achievement for the country. Serbia has, for the first time, received an investment credit rating, a milestone that will play a pivotal role in Serbia’s economic growth and its positioning on the international stage.
After nearly a decade of effort and economic stabilization, Serbia has attained a BBB- rating, officially recognizing it as a country with favorable conditions for investment. This rating not only assesses the nation’s ability to repay its debts but also signals a significant turning point in Serbia’s economic trajectory. With this new status, Serbia enters the group of countries deemed low-risk for investors, which will result in more favorable borrowing conditions and enhanced access to international capital markets.
The increase in Serbia’s credit rating brings numerous benefits to domestic companies, which will now find it easier to attract foreign investments. This achievement opens doors to lower interest rates, faster financing, and better terms for long-term investments. Companies previously restricted by the former credit rating can now consider Serbia as a reliable investment destination, accelerating economic growth and creating new jobs.
For Serbia, which is now the first country in the Western Balkans and the only EU candidate country to achieve this status, the investment credit rating represents a crucial step forward. It reflects stability, security, and long-term reliability, sending a strong signal to international investors that Serbia is a safe and low-risk destination for investments.
What is an Investment Credit Rating?
A country’s credit rating serves as a measure of its ability to repay debts and meet financial obligations. Đorđe Dimitrijević, the Director of the Open Market Operations Department at the National Bank of Serbia, explains that credit ratings are a key indicator for investors evaluating potential investments in a country, whether through direct investments or by purchasing government bonds. A higher credit rating denotes a lower risk and a greater ability for the country to service its debts efficiently.
The benefits of a higher credit rating are manifold. In addition to attracting greater foreign investment, the state will gain access to more favorable borrowing terms, making it easier for both the government and domestic companies to secure financing. This, in turn, contributes to faster economic growth and overall stability.
How Do Leading Agencies Assess Ratings?
The world’s leading rating agencies, including Moody’s, Standard & Poor’s, and Fitch, use various economic indicators to determine a country’s credit rating. In their evaluations, they consider factors such as GDP, inflation, labor market performance, as well as the effectiveness of monetary and fiscal policies, debt levels, institutional development, and geopolitical context. The credit rating scale consists of 22 levels, with countries divided into two main categories—those with investment-grade ratings (the top 10 levels) and those with non-investment-grade ratings (the lower 12 levels).
Benefits of an Investment Rating
Achieving an investment-grade rating for Serbia means reduced risk for investors, leading to lower risk premiums and more favorable financing conditions. It also enables Serbia to attract capital from more conservative investment funds that only invest in countries with investment status. These improvements will collectively drive faster economic growth, higher employment, and better conditions for both domestic companies and foreign investors.
In the past decade, Serbia has significantly improved its credit rating, advancing by three levels and positioning itself just below the investment-grade category. With this new rating, Serbia is now opening up a wide array of opportunities that will further enhance the country’s economic potential.