RTTNews - Fitch Ratings Thursday lowered the outlook on Macedonia's foreign currency and local currency Issuer Default ratings (IDR) to negative from stable. At the same time, the agency affirmed the foreign and local currency IDRs at 'BB+', the short-term foreign currency rating at 'B' and the Country Ceiling at 'BBB minus'.

Eral Yilmaz, Associate Director in Fitch's Emerging Europe sovereigns group said, The Negative Outlook on Macedonia's ratings reflects the risk that the deterioration in the global economic and financial environment will impose a more costly macroeconomic adjustment on the country, given the large current account deficit.

Fitch noted that the country's current account deficit widened to almost 13% of GDP last year from 7.5% in 2007, but forecasts the deficit to narrow to 10% of GDP this year. Fitch expects that the foreign direct investment, which financed half of the current account deficit in 2008, to fall sharply this year, even as it expects the global credit crunch to make it more difficult for the private sector to borrow externally, causing a decline in foreign exchange reserves and put pressure on the country's currency that is currently pegged to the euro.

Meanwhile, the firm said prudent fiscal policy was rating strength for Macedonia, as the central government budget deficit averaged less than 0.2% of GDP in the five years to 2008. Macedonia's ratings continued to be underpinned by its moderate government debt burden of 22% of GDP at the end of 2008, which is below the 'BB' range median of 35%, and per capita income level of USD4,600 at market exchange rates ,which is higher than the 'BB' range median of USD3,600, as also its net public external creditor status, Fitch said.

The firm, meanwhile, expects the country's GDP to contract 2% this year, even as the government lowered the growth forecast for 2009 to 1% in April.

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