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Balkans: Milosevic Ouster Won't Raise Ratings For Neighbors

While the economies of Yugoslavia's neighbors are expected to benefit from the fall of former President Slobodan Milosevic in the form of increased trade, international analysts say the countries' credit ratings won't see much improvement soon. RFE/RL's Ron Synovitz examines the reasons why.

Prague, 19 October 2000 (RFE/RL) -- Officials in the Balkans have complained for years that their economies -- and perceptions of their economies -- have been hurt by the international embargo against Yugoslavia. Since the Kosovo crisis, blocked navigation along the Danube River also has hampered trade for Yugoslavia's Balkan neighbors.

But analysts at international credit-rating agencies say the situation in Yugoslavia plays only a small part in economic assessments of the Balkan states. They say investors are more interested in the pace of internal reforms than on the external situation.

The situation has been especially critical for Romania and Bulgaria, two countries whose main transport routes to Western Europe pass through Serbia.

Nina Ramondeli is a vice president of Moody's Sovereign Ratings Group, which assesses countries' ability to make payments on their external debts. Ratings assigned by companies like Moody's and another large agency, Standard and Poors, are frequently used by banks and businessmen to assess the relative risk of investing in a country.

She says her company is not likely soon to issue a more positive assessment of Romania or Bulgaria only because of the changes in Belgrade. She tells RFE/RL that internal reforms in those countries are the real issue:

"We have spoken to investors that were very concerned about the implications of Yugoslavia and the instability in the region. But again, the rating of Romania does not stand alone on the situation in Yugoslavia."

The sentiment is similar at Standard and Poors. In their latest report on Romania, issued two months ago, the agency's analysts upgraded their long-term outlook for the country from a "negative" rating to a "stable" one. The report noted some progress on reforms.

But the agency is warning investors to be careful about putting money in Romania. It says the government has the capacity to pay off its long-term bonds for now, but adverse economic conditions could impair its ability to pay down debt in the future.

Standard and Poors also says upcoming parliamentary and presidential elections could disrupt the direction and pace of reforms. Ion Iliescu, from the leftist Party of Social Democracy, is leading opinion polls for the November 26 first round ballot for the presidency.

Helena Hessel, director of Standard and Poors' division on Central and Eastern Europe, tells RFE/RL the ratings for both Romania and Bulgaria would fall quickly if Socialists came to power because both countries have had bad experiences with such governments in the past:

"The history of Bulgaria has been that whenever Socialists were in power, nothing happened [on economic reforms]. [This is] similar to Romania's case. Only when a more market-oriented, right-to-the center type of government, or coalition government, has been in power -- both in Bulgaria and Romania -- were they able to pursue some kind of macroeconomic stabilization and structural reform."

Hessel says, however, that the presence of socialists or former communists in a government does not necessarily mean indecisive economic policies and paralysis. She points to Poland and Hungary as countries where left-leaning governments have pursued reform agendas with success:

"In other more advanced transition economies, governments of former communists -- say in Poland or Hungary -- did not necessarily mean that there is less reform."

Officials from both rating agencies say that while it's clear Milosevic's ouster will improve the economic situation in the region, it will be up to the individual governments to make the right decisions to encourage investment.

(George Stoytchev of the Bulgarian service contributed to this report)