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Fitch upgrades Serbia to BB+, outlook stable

Fitch Ratings upgraded Serbia's long-term foreign and local currency issuer default ratings to BB+ from BB, with a stable outlook.

The rating agency said Sept. 27 that the upgrade was based on the consolidation of the country's stable macroeconomic position in recent years, as shown by a low inflation rate, a stable foreign exchange rate and an increase in foreign exchange reserves.

The Serbian government maintained fiscal discipline after bringing general government surpluses to an average of 0.9% of GDP in 2017-2018, from a deficit of 6.2% in 2014, according to Fitch. The rating agency expects the country to top its deficit target of 0.5% of GDP in 2019-2021.

Fitch expressed confidence that Serbia's debt is on a downward path, noting the country's public debt structure improvements. It added that improvements were also made in the credit fundamentals of the banking sector, particularly on asset quality.

Meanwhile, the rating agency said progress in addressing weaknesses in state-owned banks remains mixed, although the government's sale of an 82% stake in Komercijalna banka a.d. Beograd is advancing in line with the year-end target.

Fitch also flagged Serbia's slow progress in structural reforms.