S&P affirms Serbia

Standard & Poor's said it affirmed its long- and short-term foreign and local currency sovereign credit ratings on the Republic of Serbia at BB/B. The outlook is stable.

The recovery rating is 4 and the transfer and convertibility assessment is BB.

S&P said its ratings on Serbia are constrained by the agency's view of vulnerabilities emanating from the country's high external debt, sizable current account deficits and limited monetary flexibility due to the euroization of bank deposits and claims.

The agency said the ratings are supported by Serbia's moderate government debt levels, which S&P expects to be slightly above 45% of GDP at the end of 2012, and by its E.U. candidate status, which boosts the potential for reforms that could stimulate growth and rebalance the economy toward a more export-driven model.

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