Skopje, 30 April 2022 (MIA) — Fitch Ratings has affirmed North Macedonia's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB+' with a negative outlook, the Ministry of Finance said in a press release, pointing out that keeping the rating was of high importance to the country amid the global crisis. According to the Ministry of Finance, Fitch Ratings said North Macedonia's ratings were supported by favorable governance relative to the 'BB' median, and a credible and consistent policy mix underpinned by the longstanding peg to the euro. The negative outlook reflects continued material downside risks to growth and public finances following the significant pandemic shock and the indirect effects of the war in Ukraine, the Finance Ministry adds. According to the report, higher energy and food prices and slowdown in the EU (70% of exports) are expected to lead growth to decelerate to 2.8% in 2022, from 4% in 2021. The negative impact of net trade, however, is predicted to be partly balanced by private consumption cushioned by government support measures and wage increases, and investment. The agency also expects a modest pick up to 3% in 2023, reflecting some easing of geopolitical risks and energy price pressures, and gradual fiscal consolidation with continued emphasis on public investment. The risk of a prolonged conflict in Ukraine, continued problems of global manufacturing supply chains or the fallout from abrupt energy supply disruptions from Russia (100% of gas imports), such as recently announced for Poland and Bulgaria, represent key downside risks to Fitch's growth outlook. Fitch also forecasts the general government deficit to increase to 6.5% 2022, from 5.4% in 2021 and above the 4.3% of the 2022 budget, reflecting measures to mitigate rising food and energy prices (EUR400 million or 3.2% of GDP March package), demand for higher public sector wages, higher pension spending and government support for key sectors including energy and agriculture. The report says the general government deficit is expected to decline to 4.8% in 2023, as temporary measures such as lowering VAT rates and support for the electricity sector are withdrawn. Fitch welcomes authorities' commitment to fiscal consolidation by outlining a realistic fiscal strategy including specific measures to support tax revenue growth and keep current spending in check, thus reducing the fiscal deficit and supporting debt stabilization. The agency notes that the general government debt declined slightly to 51.8% of GDP due to high nominal GDP growth, lower-than-budgeted deficit and the use of the majority of the IMF's SDR allocation (1.4% of GDP). Nevertheless, it says, higher deficits will push general government debt up to 55.2% of GDP in 2022 and 56% in 2023, in line with the projected 'BB' median. Fitch Ratings is an international credit rating agency. Investors use the company's ratings as a guide as to which investments will not default and subsequently yield a solid return. Previously, Standard & Poor's said it had affirmed its 'BB-/B' long-term and short-term credit ratings on North Macedonia, with a stable outlook. mr/