May 20, 2016 / 11:56 AM / 4 years ago

Fitch: Macedonia Election Delay Extends Political Uncertainty

(The following statement was released by the rating agency) LONDON, May 20 (Fitch) The postponement of Macedonia's elections extends the country's political deadlock, adding to pressure on the country's 'BB+' sovereign rating, Fitch Ratings says. The Negative Outlook on the rating reflects the risks to political stability that emerged in 2015, as well as the rising debt-to-GDP ratio. Macedonia's parliament this week agreed to indefinitely postpone elections due on 5 June after a boycott by opposition parties. June's poll had itself been rescheduled from 24 April, when elections were meant to take place under the road-map brokered last summer by the European Union to ease tensions after the opposition alleged widespread government wiretapping. Some progress has been made implementing the road-map, and postponing the June poll, which was unlikely to have been deemed free and fair, could help re-invigorate the process. The European Commission said the decision created "a renewed opportunity for the country to address a number of serious issues at the heart of the prolonged political crisis." However, the postponement also highlights how political polarisation remains high, and public confidence in the political system low. The main political parties have failed to agree on media and electoral reforms, and the president's announcement of an amnesty for 56 people accused of involvement in wiretapping prompted street protests last month. We acknowledged the possibility that April's scheduled vote would not take place when we affirmed Macedonia at 'BB+/Negative' in February. This week's postponement maintains uncertainty over when elections will take place, whether they will be free and fair, whether the losers accept the result, and if the resulting administration can enact measures to improve governance. Healthy economic growth has supported the rating (we forecast real GDP to increase 3.6% this year and next year). However, the uncertain political environment could affect economic activity, as was seen in August last year when the government adopted a supplementary budget and increased spending as growth slowed on rising political volatility. Despite shortfalls in VAT and personal income tax receipts, better-than-expected revenue performance kept the 2015 fiscal deficit within the supplementary budget's target of 3.6% of GDP. Political uncertainty has increased government borrowing costs. Deficits are pushing up Macedonia's debt burden, and we forecast the general government debt ratio to rise to 41.1% of GDP this year, up from 38% at end-2015. The continuing political crisis makes it less likely that a credible medium-term fiscal consolidation programme consistent with stabilising the ratio, and incorporating structural policy measures, emerges. Our next scheduled review of Macedonia's rating is on 19 August. <a href=" 8222">Click here to view the latest Full Rating Report on Macedonia. Contact: Kit Ling Yeung Associate Director Sovereigns +44 203 530 1527 Fitch Ratings Limited 30 North Colonnade London E14 5GN Ed Parker Managing Director Sovereigns +44 203 530 1176 Mark Brown Senior Director Fitch Wire +44 203 530 1588 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email:; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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