Fitch Ratings upgraded Serbia’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to 'BB+' from 'BB' on September 27, maintaining the stable outlook.

The improved rating reflects Serbia's stabilising macroeconomic position.

Inflation remained low and stable and will match the expectations of Serbia’s central bank to gradually reach 3% in 2021, while the exchange rate is broadly stable, Fitch said in a statement.

Serbia’s government also maintained fiscal discipline, which resulted in an average 0.9% budget surpluses in 2017-2018, and Fitch expects a further outperformance against the government deficit target of 0.5% of GDP in 2019-2021.

“Fitch anticipates a broadly flat fiscal balance in 2020 and 2021, with deficits of 0.1% and 0.2% respectively, as higher capital and social expenditures (in part related to next April's parliamentary election) are offset by robust revenue growth and debt interest savings,” the statement reads.

At the same time, Serbia’s general government debt should continue falling to 46.2% of GDP in 2021 compared to 54.5% in 2018.

Fitch also noted that there has been a further improvement in the credit fundamentals of the banking sector, particularly on asset quality, which has helped support stronger lending growth, of 10.1% in July.

The ratio of non-performing loans decreased to 5% at end-July from 5.7% at end-2018. The banking sector remained well capitalised, with a Common Equity Tier 1 ratio of 22.1% at end-June, up from 21.1% six months earlier.

Serbia’s Finance Minister Sinisa Mali assessed the rating’s improvement as a proof of the successful reforms of the government and noted that now the country is significantly more competitive thanks to its macroeconomic stability.