S&P lowers Serbia outlook to stable

Standard & Poor's said it revised its outlook on the Republic of Serbia to stable from positive, due to a loosening fiscal policy that exacerbates the Republic's rising external imbalances.

At the same time, the long-term BB- and short-term B sovereign credit ratings on Serbia, along with the BB- long-term senior unsecured debt rating and 4 recovery rating on its foreign currency debt, were affirmed, the agency added.

The agency said that the outlook revision reflects the weakening of both fiscal and external indicators compared with its expectations at the time the positive outlook was assigned to the Republic in February 2006.

Having analyzed the long-delayed budget law for 2007, which was approved by the Serbian parliament in early July, S&P said it now expects the central government to generate a deficit of 1.2% of GDP in 2007, following a balanced budget in 2006.

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