Fitch Ratings said it has significantly revised its 2017 GDP growth forecast for Macedonia to 2.6% from 3.4% previously.
The rating agency also expects Macedonia's public debt ratio estimated at 42.3% of GDP in 2016, to rise further under the new government given its electoral promises of higher public sector wages and enhanced social protection and healthcare access for the public, it said in a statement earlier this week.
Although the formation of a new government in Macedonia concludes a prolonged political hiatus, it does not eliminate political risk in the country, according to Fitch Ratings.
Last week, Macedonia's parliament voted into office a coalition government formed by Social Democratic Union (SDSM) leader Zoran Zaev, who vowed to boost the country's economy and speed up the EU integration process. The new government comprises representatives of SDSM and two ethnic Albanian parties, DUI and the Alliance of Albanians. Conservative VMRO-DPMNE party, which had been in power for 11 years, went into opposition. The country has been without an elected government since January 2016, when the coalition cabinet led by nationalist VMRO-DPMNE party resigned amid a wiretapping scandal.
Fitch Ratings fears that VMRO-DPMNE, which remains the largest single party in the parliament holding 51 seats, might try to obstruct the work of the new government.
"[...] it may be difficult for the SDSM-led government to enact its policies, which include economic reforms and kick-starting moves to join the EU and NATO," Fitch said.
In February, Fitch affirmed Macedonia's 'BB'/Negative sovereign rating. Back then the agency stated that a marked easing in political tension and uncertainty, or implementation of a credible medium-term fiscal consolidation programme, could result in a stabilisation of the outlook. If, though, in case of an increased political instability, fiscal slippage, or a widening of external imbalances that put pressure on reserves or the currency peg would results in worsening of the ratingn
