Montenegro's sovereign ratings confirmed

Standard & Poor's (S&P) on Monday affirmed Montenegro's 'BB+' long-term and 'B' short-term sovereign credit ratings. The International rating agency said the ratings came on Montenegro's good fiscal performance and prudent economic growth. Montenegro's sovereign ratings confirmed "At the same time, S&P also affirmed its 'AAA' transfer and convertibility assessment," the agency said in a statement. The outlook remained stable. "The ratings on Montenegro are constrained by external imbalances which have been fuelled by rapid credit growth and rising incomes," S&P's credit analyst Sladjana Tepic said in the statement. "The ratings are supported by strong growth, the government's budgetary surplus, political stabilization, and prospects for EU accession." Montenegro's European prospects were boosted last October when the country of 620,000 people signed the Stabilization and Association Agreement, which opened the way for the nation to apply for membership of the bloc. A week later, Montenegro's first constitution since the country restored its independence came into force, an event seen as an important milestone on the further road to EU membership for the tiny Adriatic republic. The prospects for EU accession are expected to remain a key driver for further reforms, the agency added. Montenegro decided in a referendum held last May to restore its independence and break off from Serbia. The two states were tied in a loose union that replaced rump Yugoslavia in 2001. According to S&P, regional political developments, in particular the unresolved Kosovo issue, may moderately affect Montenegro's political and economic environment. The stable outlook on Montenegro reflects the agency's expectations that the government will pursue economic and fiscal policies that address Montenegro's sizeable external imbalances, it said. Strong economic growth, rising exports, and a rapidly declining public debt burden would contribute to further improvements in Montenegro's creditworthiness, S&P said. Sustained net foreign direct investments (FDI) inflows, particularly to the tourism and energy sectors, would also be supportive, it added. Montenegro said last month it expected an economic growth of a real 7.0% this year and consumer price inflation of up to 4.0%. The government’s 2008 macroeconomic targets include a rise in the gross domestic product (GDP) to 2.529 billion euro, and a budget surplus at 0.26% of GDP this year. The government’s macroeconomic framework also forecasts foreign direct investments of 793.79 million euro in 2008. "Conversely, should the country's external imbalances continue to mount, resulting in a rapid rise in external debt, potentially fuelled by a continued surge in banking credit, this could place downward pressure on the ratings," Tepic said. "The overheating in the stock and property markets, if it continues, could stunt economic growth in the medium term, and therefore also poses a risk to the ratings."

Montenegro's sovereign ratings confirmed

"At the same time, S&P also affirmed its 'AAA' transfer and convertibility assessment," the agency said in a statement.

The outlook remained stable.

"The ratings on Montenegro are constrained by external imbalances which have been fuelled by rapid credit growth and rising incomes," S&P's credit analyst Slađana Tepić said in the statement.

"The ratings are supported by strong growth, the government's budgetary surplus, political stabilization, and prospects for EU accession."

Montenegro's European prospects were boosted last October when the country of 620,000 people signed the Stabilization and Association Agreement, which opened the way for the nation to apply for membership of the bloc.

A week later, Montenegro's first constitution since the country restored its independence came into force, an event seen as an important milestone on the further road to EU membership for the tiny Adriatic republic.

The prospects for EU accession are expected to remain a key driver for further reforms, the agency added.

Montenegro decided in a referendum held last May to restore its independence and break off from Serbia. The two states were tied in a loose union that replaced rump Yugoslavia in 2001.

According to S&P, regional political developments, in particular the unresolved Kosovo issue, may moderately affect Montenegro's political and economic environment.

The stable outlook on Montenegro reflects the agency's expectations that the government will pursue economic and fiscal policies that address Montenegro's sizeable external imbalances, it said.

Strong economic growth, rising exports, and a rapidly declining public debt burden would contribute to further improvements in Montenegro's creditworthiness, S&P said. Sustained net foreign direct investments (FDI) inflows, particularly to the tourism and energy sectors, would also be supportive, it added.

Montenegro said last month it expected an economic growth of a real 7.0% this year and consumer price inflation of up to 4.0%. The government’s 2008 macroeconomic targets include a rise in the gross domestic product (GDP) to 2.529 billion euro, and a budget surplus at 0.26% of GDP this year.

The government’s macroeconomic framework also forecasts foreign direct investments of 793.79 million euro in 2008.

"Conversely, should the country's external imbalances continue to mount, resulting in a rapid rise in external debt, potentially fuelled by a continued surge in banking credit, this could place downward pressure on the ratings," Tepić said.

"The overheating in the stock and property markets, if it continues, could stunt economic growth in the medium term, and therefore also poses a risk to the ratings."