S&P affirms Montenegro’s sovereign ratings, cuts outlook to negative; Moody’s cuts rating to B1 from Ba3

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    Podgorica, Montenegro (15 May 2016) – Credit rating agency Standard and Poor’s published a new report on Montenegro, which confirmed the earlier assessment of potential economic growth of Montenegro with B+/B assessment, but cut its outlook to negative from stable, while Moody’s cut Montenegro’s rating to B1 from Ba3…

    Podgorica, Montenegro (15 May 2016) – Credit rating agency Standard and Poor’s published a new report on Montenegro, which confirmed the earlier assessment of potential economic growth of Montenegro with B+/B assessment, but cut its outlook to negative from stable, while Moody’s cut Montenegro’s rating to B1 from Ba3.

    S&P’s experts estimated that by 2019 the Montenegrin economy will approximately grow at an average of about 3%, thanks to the development projects being implemented dominantly in the field of tourism, energy and transport infrastructure. Although the agencies recognise positive multiplier effects related to Bar-Boljare highway, agency analysts warn of a potential possibility of higher costs during construction, which could increase country’s need for additional funding, but also increase interest rates.

    The risk is related to the exchange rate differences, but they recognise the intention of the country to take measures in order to protect itself. The reason for reducing the outlook of Montenegro, according to the estimates set out in the Reports, is the continuation of the upward trend of public debt and deficit as major risks to stability and sustainability of public finances in the future. Growing debt, as explained, can significantly limit capacity of adequate responses to external and internal shocks, taking into account the very limited monetary and fiscal flexibility of Montenegro, while the deficit increase resulted from higher expenses for social benefits, wages and pensions.

    The agencies also recognised Government’s continuous efforts to fight the gray economy and increase tax compliance, which could, in the future, encourage greater economic activity and lead to greater participation of revenue authorities.

    Source: Government of Montenegro