Fitch affirms Macedonias ratings at BB+, outlook stable.

By bne IntelliNews October 18, 2012
Fitch Ratings has affirmed Macedonia's long-term foreign currency and local currency Issuer Default Ratings (IDRs) at BB+, with a stable outlook, the rating agency said in a statement. Fitch also affirmed the countrys short-term rating at B and the country ceiling at BBB-. The ratings' affirmation reflects Macedonias track record of low inflation and moderate budget deficits, relatively low public debt level and well capitalised banking system, Fitch said. On the other hand, the country has a high unemployment rate, limited fiscal financing flexibility and political risks. The agency expects Macedonias GDP growth to be 0.5% this year, 2% in 2013 and 3.5% in 2014. "In September 2012 the government disclosed budget arrears of 2% of GDP. It intends to clear these in two steps by Q1 13. This will raise the cash budget deficit target by one percentage point of GDP to 3.5% in 2012, above the previous target of 2.5%, and 3.5% in 2013," Fitch said. The rating agency expects the general government debt to rise from 27.8% of GDP at end-2011 to 31.3% at end-2012. The agency forecasts the current account deficit at 2%-2.5% of GDP this year and to stay at that level in 2013 and 2014. The agency sees the net external debt at 19% of GDP in 2012. Fitch said that negative rating action could be triggered by a substantial overshoot of the 2012-13 budget deficit targets and if the authorities fail to develop a plan for preventing fiscal arrears in the future, among others. The agency also noted that over the medium-term, positive rating action may be supported by accumulating evidence that productive FDI is leading to the successful diversification of the countrys economy, along with recovering growth.

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