Fitch Ratings has affirmed Macedonia’s Long-Term Issuer Default Ratings (IDR) at ‘BB+’ with a Negative Outlook.
North Macedonia’s ratings are supported by favorable governance, human development, and ease of doing business indicators, and a track record of coherent macroeconomic and fiscal policy that underpins the longstanding exchange rate peg to the euro. The EU accession process helps to anchor policy and support exports and FDI inflows. These factors are balanced against high exposure of public debt to exchange rate risk, banking sector euroisation and high structural unemployment, reflecting skill mismatches and a large informal economy, says Fitch.
It adds the Negative Outlook reflects continued downside risks to near-term growth and public finances from the coronavirus pandemic. The number of new cases in the country remains high and the vaccination campaign has faced delays (3% of the population vaccinated at end-April) due to global supply constraints, which could weigh on the economy’s recovery. The potential need for additional fiscal support measures and lack of detail regarding the government’s fiscal consolidation plans create risks to our fiscal baseline and the medium-term stabilization of government debt.