Fitch gives North Macedonia first rating upgrade in 13 years

Fitch gives North Macedonia first rating upgrade in 13 years
By Valentina Dimitrievska in Skopje June 16, 2019

Fitch Ratings upgraded North Macedonia's long-term foreign and local-currency ratings (IDRs) to 'BB+' from 'BB' with stable outlook on June 14.

This is the first time in 13 years that Fitch has upgraded the rating of the country, known as Macedonia until it was renamed North Macedonia under the name deal with Greece in order to solve the long-standing dispute between the two neighbours.

Fitch praised improved governance standards and reforms in the country saying that this provides greater reassurance that North Macedonia “will not revert to the political paralysis of 2014-2017.”

This "facilitated further progress towards Nato membership and the opening of EU accession negotiations, which support investor confidence and act as policy anchors for sustained reform and macroeconomic stability,” Fitch said.

Fitch forecasts that North Macedonia’s GDP growth will accelerate to 3.4% in 2019 and 3.6% in 2020, from 2.7% in 2018 and just 0.2% in 2017.

The country's central bank expects GDP growth of 3.5% this year.

The country’s gross general government debt is expected to increase 2.0pp in 2019 to 42.5%, before falling to 42.2% in 2020, close to the 'BB' median of 42.5%.

Fitch foresees that general government gap will widen to 2.4% of GDP in 2019 and 2.2% in 2020, driven by higher expenditure as well as arrears clearance this year.

In 2018, general government deficit narrowed by 1.7pp in 2018 to 1.1% of GDP  on the back of a large under-execution of public investment projects, 9.4% tax revenue growth, and improved local government balances.

“The improved credit rating will have a positive impact on investing decisions in the country, which will further result in higher economic growth, increased exports, more jobs and higher salaries,” North Macedonia’s Finance Minister Dragan Tevdovski commented on the improved rating.