COMMISSION STAFF WORKING DOCUMENT SWD Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on guarantees covered by the general budget - Situation at 30 June 2012
Date: 2013-04-18
Institutions: European Commission
Subjects: EIB loan, budgetary reserve (EU), general budget (EU), investment protection, third country

EUROPEAN 
COMMISSION 

Brussels, 18.4.2013  
SWD(2013) 130 final 

COMMISSION STAFF WORKING DOCUMENT 

SWD 

Accompanying the document 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on guarantees covered by the general budget - Situation at 30 June 2012 

{COM(2013) 211 final} 

EN 

   EN 

 
 
 
 
  
 
Table of Contents 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

Introduction ..................................................................................................................4 

Situation of risks covered by the Budget......................................................................4 

Overview of capital loan operations covered by the EU guarantee .............................4 

Risk factors ...................................................................................................................6 

Cumulative and annual Budget guarantee exposures ...................................................7 

Loan operations covered by the Budget guarantee.......................................................9 

Evolution of risk .........................................................................................................12 

2.5.1.  Situation of loans to Member States at 30 June 2012.................................................12 

2.5.2.  Situation of loans to third countries............................................................................13 

2.5.3.  Borrowing/lending operations ....................................................................................15 

2.5.4.  Guarantees given to third parties ................................................................................16 

2.5.5.  Default interest penalties for late payment .................................................................16 

3. 

Country-risk evaluation ..............................................................................................16 

3.1. 

Candidate countries ....................................................................................................17 

3.1.1.  Former Yugoslav Republic of Macedonia..................................................................17 

3.1.2.  Montenegro.................................................................................................................18 

3.1.3.  Serbia ..........................................................................................................................19 

3.1.4.  Turkey.........................................................................................................................20 

3.2. 

Potential candidate countries ......................................................................................21 

3.2.1.  Albania........................................................................................................................21 

3.2.2.  Bosnia and Herzegovina.............................................................................................22 

3.3. 

ENP countries .............................................................................................................24 

3.3.1.  Armenia ......................................................................................................................24 

3.3.2.  Ukraine .......................................................................................................................25 

3.4. 

Mediterranean partners ...............................................................................................26 

3.4.1.  Egypt...........................................................................................................................26 

3.4.2. 

Jordan..........................................................................................................................27 

3.4.3.  Lebanon ......................................................................................................................29 

2 

 
 
3.4.4.  Morocco......................................................................................................................30 

3.4.5.  Syria............................................................................................................................31 

3.4.6.  Tunisia ........................................................................................................................32 

3.5. 

Other countries ...........................................................................................................34 

3.5.1.  South Africa................................................................................................................34 

3.5.2.  Tajikistan ....................................................................................................................35 

3 

 
 
 
 
1. 

INTRODUCTION 

This working document is published in parallel with the report of the Commission to the European 
Parliament  and  the  Council  on  guarantees  covered  by  the  budget  at  30  June  2012.  It  provides 
information on quantitative aspects of the risk borne by the EU Budget related to Member States and 
third countries. An overview of the outstanding amount of loans covered by the Budget under each 
programme is presented in section 2. The third countries representing important risks to the Budget 
during the first semester 2012, and either categorised as “severely indebted” according to criteria set 
by the World Bank or facing significant imbalances in their external or debt situation, are included in 
the country risk evaluation in section 3. The evaluation comprises short analyses and tables of risk 
indicators. 

The evaluated countries are grouped in 5 sub-sections: candidate countries (3.1), potential candidate 
countries (3.2), European Neighbourhood Policy (ENP) countries (3.3), Mediterranean partners (3.4), 
and other countries (3.5). 

2. 

SITUATION OF RISKS COVERED BY THE BUDGET 

2.1. 

Overview of capital loan operations covered by the EU guarantee 

Table A1 shows the outstanding amount of capital in respect of borrowing and lending operations for 
which the risk is covered by the Budget. The figures show the maximum possible risk for the EU in 
respect  of  these  operations  and  must  not  be  read  as  meaning  that  these  amounts  will  actually  be 
drawn from the Fund or the Budget. 

4 

 
 
TABLE A1: CAPITAL OUTSTANDING IN RESPECT OF OPERATIONS DISBURSED at 30.06.2012 (in EUR million)

Authorised
ceiling (a)

Capital
outstanding at
31.12.2011 (b)

Capital
outstanding at
30.06.2012 (b)

Remainder
to be disbursed
at 30.06.2012  (c) 

Operations

MEMBER STATES
EIB (Member States)
MFA to  Romania
Euratom to Bulgaria and Romania

BoP
Hungary
Latvia
Romania

EFSM
Ireland
Portugal

MEMBER STATES - TOTAL
THIRD COUNTRIES
A. Macro-Financial Assistance
Albania
Armenia
Bosnia-Herzegovina
FYROM
Lebanon
Serbia 
Montenegro
Tajikistan

6,500
3,100
5,000

22,500
26,000

63,100

9
65
40
90
50
473
7
75

2,965
25
404

3,500
2,900
5,000

13,900
14,100

42,794

9
26
36
61
25
373
7
28

565
43

9,224
7,506
2,703
1,034
23,431
21,074
63,867

2,838
25
393

3,500
2,900
5,000

18,400
20,100

53,156

9
65
34
56
25
373
7
16

585
41

9,707
7,701
2,780
1,017
24,043
21,831
74,987

265

4,100
5,900

10,265

25
100

125

4,720
6,400
1,049
132
12,567
12,427
22,691

809

Sub total MFA
B. EURATOM (1)
C. Other
EIB Pre-Accession countries (climate change included) (3)
EIB Neighbourhood and Partnership countries
EIB Asia and Latin America
EIB South Africa
Sub total EIB (2)
THIRD COUNTRIES - TOTAL
GRAND TOTAL
(1) The overall ceiling is EUR 4 000 million for loans to Member States and to certain non-member States. 

31,103
29,490
8,357
2,436
71,386
72,195
135,295

(2) The subtotal EIB includes the EIB loans to Member States. 

(3) The Climate change mandate (EUR 2,000 million) has been adopted together with the 2007-2013 Mandate's increase up to EUR 29,484 million (Decision n°1080/2011/EU)

• 

(a) 

Explanatory notes to table (A1) 

Authorised ceiling (Table A1) 

This  is  the  aggregate  of  the  maximum  amounts  of  capital  authorised  (ceilings)  for  each  operation 
decided by the Council or by the European Parliament and the Council. 

(b) 

Capital outstanding (Table A1) 

This is the amount of capital still to be repaid on a given date in respect of operations disbursed. 

(c) 

Remainder to be disbursed (Table A1) 

Amount of loans signed, but  not yet disbursed at the reporting date. 

• 

EIB financing operations 

5 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
In  the  past,  EIB  financing  operations  represented  the  largest  category  of  the  total  loan  operations 
covered  by  the  Budget.  At  the  date  of  this  report,  they  still  amount  to  32%.  However,  the 
implementation  of  the  EFSM  gradually  increases  the  portion  of  the  risk  borne  by  the  Budget  that 
relates to the Member States. 

The following table provides further details on the breakdown of EIB financing operations. 

ANNEX TO TABLE A1: SITUATION IN RESPECT OF EIB OPERATIONS at 30.06.2012 (in EUR million)

Operations 

Authorised
ceiling (a)

Loans made
available minus
cancellations

Amounts
disbursed

Amounts
outstanding 
at 30.06.2012 (b)

Mandate 2007/2013:
Pre-Accession countries
Neighbourhood and Partnership countries:

Mediterranean
Eastern Europe, Southern Coucasus and Russia

Asia and Latin America:

Asia
Latin America

South Africa
Climate change mandate

Previous General Mandate 2000/20073:
Pre-Accession countries
Neighbourhood and Partnership countries
Asia and Latin America
South Africa
Member States (following the accession) 2

sub-total 65 %1

Financial agreements (70% Guarantee rate)
Pre-Accession countries
Neighbourhood and Partnership countries
Asia and Latin America:
South Africa
Member States (following the accession) 2

sub-total 70 %1

Financial agreements (75% Guarantee rate)
Pre-Accession countries
Neighbourhood and Partnership countries
Member States (following the accession) 2

sub-total 75 %1

Financial agreements (100% Guarantee rate)
Pre-Accession countries
Neighbourhood and Partnership countries
Asia and Latin America
South Africa
Member States (following the accession) 2

sub-total 100 %1
Total  

(1) Percentage figures relate to the Guarantee rate.

29,484
9,048
13,548
9,700
3,848
3,952
1,040
2,912
936
2,000

20,060
10,235
6,520
2,480
825

49,544
7,477
3,770
2,310
1,022
375

7,477
7,712
1,350
6,362

7,712
6,653
4,700
750
903
300

6,653
71,386

19,998
7,982
8,612
6,717
1,895
2,663
783
1,881
591
150

18,869
7,303
5,905
2,105
817
2,739
38,867

477
1,587
809
375
3,235
6,482

713
4,478
1,857
7,047

29
315
710
285
3,982
5,320
57,717

9,626
4,435
2,768
2,406
362
1,819
443
1,376
455
150

16,717
6,247
5,409
1,835
739
2,488
26,344

451
1,521
675
274
3,190
6,111

725
4,538
1,959
7,222

29
312
725
204
4,132
5,402
45,078

9,333
4,375
2,586
2,340
246
1,774
443
1,331
447
150

11,761
4,922
4,030
831
506
1,471
21,094

218
410
96
62
1,047
1,833

42
383
32
457

1
290
78
2
289
660
24,043

(2) Loans to Member States were drawn from 'Pre-Accession countries' or from 'Neighbourhood and Partnership countries' ceilings.

(3) Including Turkey Terra and Special Action Turkey.

2.2. 

Risk factors 

Factor increasing the risk: 

•  the interest on the loans must be added to the authorised ceiling. 

6 

 
 
 
 
Factors reducing the risk: 

– 

limitation of the guarantee given to the EIB1: 

75%  of  the  total  amounts  of  loans  signed  in  the  Mediterranean  countries  based  on  the 
Mediterranean protocols of 1977 and Council Regulations 1762/92/EEC and 1763/92/EEC; 

70%  of  the  total  amounts  of  loans  signed  as  part  of  lending  operations  with  certain 
non-Member  States  authorised  by  Council  Decisions  96/723/EC,  97/256/EC,  98/348/EC 
and 98/729/EC and a sharing of risk between the EU and the EIB as the Budget guarantee 
covers only political risks in some cases; 

65%  of  the  total  amounts  of  loans  signed  as  part  of  financing  operations  with  certain 
non-Member States authorised by Council Decisions 99/786/EC, 2000/24/EC, by Decision 
N° 633/2009/EC and by Decision N°1080/2011/EU of the European Parliament and of the 
Council, and a sharing of risk between the EU and the EIB as the Budget guarantee covers 
only  political  risks  in  some  cases,  as  regards  the  two  first-mentioned  decisions,  and  only 
risks of a political or sovereign nature in the case of the last decision; 

– 

– 

operations already repaid;  

the ceilings are not necessarily taken up in full. 

An  additional  factor  to  be  considered  is  that  some  loans  are  disbursed  in  currencies  other  than  the 
EUR. Due to exchange rate fluctuations, the ceiling may be exceeded when the amounts disbursed 
up to the date of the report are converted into EUR. 

2.3. 

Cumulative and annual Budget guarantee exposures 

With the cash flow approach based on the existing loans disbursed it is possible to calculate the total 
capital  exposure  of  the  Budget  and the  total  capital  and  interest  payments  due  to  be  received  each 
year.  The  following  table  A2  includes  the  estimated  amount  of  principal  and  interest  due  each 
financial year by each country according to disbursements made until 30 June 20122. 

Table A2: Total Annual Risk borne by the Budget in EUR million based on the amounts (capital and 
interest) due under all operations (MFA, BOP, Euratom, EFSM and EIB) disbursed at 30.06.2012. 

1 
2 

Within each portfolio individual EIB loans are, de facto, guaranteed at 100% until the global ceiling is reached. 
For the purpose of this calculation, it is assumed that defaulting loans are not accelerated, i.e. only due payments 
are taken into account. 

7 

 
 
                                                 
Table A2: Total Annual Risk borne by the Budget in EUR million based on the amounts (capital and interest) due under all 
operations (MFA, BoP, Euratom, EFSM and EIB) disbursed at 30.06.2012

Ranking

Country

2012

2013

2014

2015

2016

2017

2018

2019-
2042

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59

Turkey
Portugal
Ireland
Romania
Serbia
Tunisia
Egypt
Morocco
Hungary
South Africa
Lebanon
Bulgaria
Syria
Poland
Czech Republic
Bosnia and Herzegovina
Jordan
FYROM
Croatia
Brazil
Slovak Republic
Colombia
Argentina
Vietnam
Albania
India
Peru
Latvia
Israel
the Philippines
Montenegro
Pakistan
Indonesia
Ukraine
Sri Lanka
Slovenia
Russia
Thailand
Bangladesh
China
Paraguay
Cyprus
Panama
Maldives
Lithuania
Mexico
Ecuador
Uruguay
Costa Rica
Armenia
The West Bank and the Ga
Republic of Moldova
Laos
Malaysia
Georgia
El Salvador
Malta
Nicaragua
Tadjikistan
Grand total
MS
% of MS in the total

249.38
207.57
192.71
160.37
103.15
96.80
95.78
93.39
78.99
57.47
48.79
43.38
41.51
40.25
35.10
28.00
26.82
24.05
23.24
22.89
22.10
14.20
11.25
10.25
9.91
8.88
8.67
8.49
8.05
7.78
6.91
6.69
6.65
6.09
5.74
5.66
5.30
4.56
4.44
4.20
4.15
3.92
3.60
3.06
2.63
2.61
2.39
2.08
2.03
1.99
1.50
1.49
1.38
1.02
0.70
0.52
0.35
0.16
0.09

516.89
463.06
594.88
597.58
569.88 5,569.88
590.32
372.56 1,872.14
391.55
242.45
182.77
164.03
197.74
198.92
199.89
186.20
186.65
204.89
292.98
189.90
186.44
133.46 2,128.42
100.19
91.68
85.72
80.62
102.34
92.14
83.84
86.92
85.87
81.84
77.00
77.78
43.64
53.69
74.89
45.73
56.44
68.19
93.27
50.71
50.50
35.53
42.37
43.97
41.66
47.93
45.49
40.51
42.55
45.88
253.99
113.27
81.64
15.08
25.76
37.22
26.52
26.52
26.52
38.99
40.40
50.18
21.17
24.38
20.72
23.27
22.34
17.94
33.95
29.06
22.40
16.65
16.65
16.64
96.70 1,096.57 1,265.19
17.33
20.69
14.85
15.80
17.13
15.53
19.17
17.03
14.20
6.80
6.80
10.02
13.22
13.23
13.23
11.42
6.94
7.01
15.63
13.94
10.83
4.39
7.44
9.40
12.17
9.94
10.24
0.00
2.29
9.48
0.00
0.00
8.61
10.15
8.20
7.83
15.89
15.89
15.89
0.00
3.34
5.14
6.98
6.84
6.84
5.69
5.69
5.69
4.78
4.95
5.13
3.66
3.66
3.66
4.52
4.52
4.52
4.27
5.18
4.64
0.00
0.00
4.05
2.44
2.29
2.29
3.03
3.03
3.03
4.30
2.85
2.69
2.84
2.81
2.79
0.00
0.00
1.01
3.10
1.83
0.11
2.05
1.40
1.68
0.00
0.00
0.35
0.33
0.33
0.33
0.00
4.01
12.04

601.72
578.98
970.41
537.66 4,855.57
594.88 5,344.88
464.25 1,064.25 18,688.25
444.88 4,344.88 13,062.50
444.88
301.96 1,442.21 1,593.22 1,781.96
195.40
196.01
826.70
169.84 1,121.45
198.36
170.85
190.70
750.18
163.65 1,269.20
169.60
0.00
62.98 1,558.78
636.66
110.00
109.11
72.22
218.27
81.19
220.93
80.70
70.62
29.34
47.21
43.66
370.88
51.80
203.29
33.89
33.45
29.31
194.19
38.86
80.73
237.08
73.37
14.66
8.44
26.52
29.13
33.35
106.44
21.89
144.86
22.97
61.84
36.19
0.56
13.79
760.65
26.83
234.22
14.93
14.53
14.47
82.74
19.29
1.99
4.80
8.26
8.66
157.67
17.96
54.91
14.03
0.00
2.09
113.42
19.58
0.00
0.00
0.00
0.00
48.89
5.16
0.00
11.91
0.00
0.00
126.76
7.26
5.11
5.69
5.35
4.60
3.66
3.66
2.26
4.52
0.00
4.27
0.00
0.00
84.63
2.55
4.47
3.07
35.29
5.84
60.06
2.88
0.00
0.00
59.92
4.43
23.67
2.75
0.00
0.00
8.64
0.43
0.00
0.00
1,871.12 4,184.73 7,179.66 12,152.55 10,173.23 4,979.52 9,170.19 46,862.88
7,144.9 34,708.2
74%

185.39
190.23
173.38
168.67
2.12
104.25
60.39
75.88
55.70
21.53
25.93
61.57
34.75
21.11
38.00
76.24
14.24
26.52
31.94
21.01
25.35
33.44
13.79
26.03
14.38
9.10
18.67
3.97
8.66
20.10
13.93
0.00
17.83
0.00
0.00
5.44
7.94
0.00
7.81
3.85
4.42
3.66
4.52
2.14
0.00
2.53
3.10
6.91
2.91
0.00
5.44
2.13
0.00
0.85
0.00

0.00
114.46
53.53
65.44
55.32
20.69
13.16
54.78
35.99
15.62
35.77
70.70
13.82
18.53
30.54
19.21
23.88
23.44
5.78
25.98
14.55
3.66
22.35
3.97
6.38
16.19
14.86
0.00
14.83
0.00
0.00
5.58
0.00
0.00
7.81
3.85
3.49
88.49
4.52
0.00
0.00
2.52
2.63
6.81
2.95
0.00
5.42
2.13
0.00
0.83
0.00

2,095.8
50%

5,000.8
70%

7,852.9
77%

9,562.5
79%

2,521.5
51%

801.5
43%

78%

Total 
outstanding
8,773.67
27,556.53
25,219.91
7,915.97
2,095.91
2,373.23
1,958.62
2,533.81
3,964.76
1,300.43
619.13
740.79
690.77
354.65
335.41
761.50
456.63
258.62
459.00
936.55
216.25
173.78
265.77
245.07
290.52
249.21
92.52
3,306.44
339.00
98.00
200.37
45.04
78.30
243.38
143.86
28.97
203.28
16.34
13.05
95.44
71.66
12.41
173.90
38.62
35.36
113.08
31.74
22.57
6.08
101.22
23.86
66.20
78.61
2.03
80.96
36.32
0.70
11.90
16.14
96,573.86
69,688.1
72%

8 

 
 
2.4. 

Loan operations covered by the Budget guarantee  

The Budget covers two types of lending operations. These are: 

(a) 

Lending operations to Member States. These relate to BOP, EFSM, and to lending granted 
to certain Member States prior to their EU accession under MFA, Euratom (table A3a) and 
EIB guaranteed lending operations (table A4). 

9 

 
 
TABLE A3a
BoP, EFSM, Euratom and MFA lending operations to Member States  (EUR million)

Period  31.12.2011 - 30.06.2012

Instrument

Decision

Date of
decision

Loan
term

(years)

Availability

period

(for Request for Funds)

Guarantee Maturity
Date (***)

Rate

Loan
situation

Amount
decided

 - closed (a)
 - partially disbursed (b)

 - disbursed in full (c)
 - not yet disbursed (d)

Outstanding
amount

at 31.12.2011

Operations carried out during 
the 1st semester 2012 

Amounts
disbursed

Amounts
repaid

Outstanding
amount

at 30.06.2012

2009/431/EC (1)

08/05/2009

100%

50,000.0

BOP

Total

Hungary

2009/102/EC

04/11/2008

closed **

1st tranche

2nd tranche
3 rd tranche

3.0

5.6
6.8

Latvia

2009/290/EC

20/01/2009

closed **

1st tranche

2nd tranche
3rd tranche

4th tranche

5.1

5.5
9.2

15.3

Romania

2009/459/EC

06/05/2009

closed

1st tranche

2nd tranche
3rd tranche

4th tranche
5th tranche

Precautionary EU medium-
term financial assistance for 
Romania

EFSM

Total

5.5

9.2
7.0

7.0
7.3

2011/288/EU

12/05/2011

31/03/2013

2010/407/EU

11/05/2010

100%

Ireland

2011/77/EU 

07/12/2010

08/12/2013

1st tranche

2nd tranche
3rd tranche

4th tranche
5th tranche

6th tranche
7th tranche

Portugal 

2011/344/EU

17/05/2011

1st tranche
2nd tranche

3rd tranche
4th tranche

5th tranche
6th tranche

7th tranche
8th tranche

4.9

7.0
10.0

14.9
7.0

30.2
20.1

10.0
5.0

10.0
14.9

7.0
30.2

25.9
9.9

18/05/2014

EURATOM

100%

77/270-271/Euratom 29/03/1977

80/29/Euratom

82/170/Euratom
85/537/Euratom

90/212/Euratom

SEC(2000)661/2

18/04/2000

closed

20.0

15.0
17.0

15.0
15.0

16.0
16.0

14.0

C(2004)891

30/03/2004

closed

17.0

19.0
124.1

99/732/EC

08.11.99

closed

10.0
10.0

 -

Bulgaria
     1st tranche

     2nd tranche
     3rd tranche

     4th tranche
     5th tranche

     6th tranche
     7th tranche

     8th tranche

Romania
     1st tranche

     2nd tranche
     3rd tranche

MFA*

ROMANIA IV*

     1st tranche
     2nd tranche

     3rd tranche

TOTAL

9/12/2011

7/11/2014
6/04/2016

3/04/2014

27/01/2015
10/05/2019

20/10/2025

27/01/2015

10/05/2019
22/09/2017

4/04/2018
4/10/2018

04/12/2015
04/04/2018

04/06/2021
04/09/2026

04/10/2018
04/04/2042

04/04/2032

04/06/2021

03/06/2016
21/09/2021

04/09/2026
04/10/2018

04/04/2042
04/04/2038

04/04/2022

10/05/2021

15/01/2017
19/08/2019

18/06/2018
16/01/2019

10/09/2020
4/04/2021

23/02/2020

21/07/2022

26/11/2024
23/02/2024

29/06/2010
17/07/2013

 -

60,000.0

4,000.0

(b)
(c)

(c)
(c)

(b)
(c)

(c)
(c)

(c)

(c)
(c)

(c)
(c)

(c)
(c)

(d)

(c)

(c)
(c)

(c)
(c)

(c)
(c)

(c)
(c)

(c)
(c)

(c)
(c)

(c)
(c)

(c)
(c)

(c)
(c)

(b)

(c)

(c)
(c)

(c)
(c)

(c)
(c)

(c)

(c)

(c)
(c)

(c)
(c)

(a)

16,000.0

6,500.0
2,000.0

3,100.0

5,000.0

1,400.0

48,500.0

22,500.0

26,000.0

4,000.0
500.0
500.0

1,000.0
1,000.0

1,000.0

212.5

223.5

200.0

200.0
100.0

50.0
50.0

11,400.0

3,500.0
0.0

2,000.0
1,500.0

2,900.0
1,000.0

1,200.0
500.0

200.0

5,000.0
1,500.0

1,000.0
1,150.0

1,200.0
150.0

28,000.0

13,900.0

5,000.0

3,400.0
3,000.0

2,000.0
500.0

14,100.0
1,750.0
4,750.0

5,000.0
2,000.0

600.0

403.8

180.3
40.0

8.3
20.0

16.3
26.3

27.0
25.0

17.5

223.5
100.0

90.0
33.5

25.0

25.0
0.0

25.0
0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

10,500.0

4,500.0

0.0

0.0

1,500.0
3,000.0

6,000.0

0.0

1,500.0

1,800.0
2,700.0

0.0

0.0

10.5

10.5
4.0

0.8
1.3

1.3
1.8

1.5

0.0

0.0

0.0

0.0

0.0

0.0

11,400.0

3,500.0
0.0

2,000.0
1,500.0

2,900.0
1,000.0

1,200.0
500.0

200.0

5,000.0
1,500.0

1,000.0
1,150.0

1,200.0
150.0

38,500.0

18,400.0

5,000.0

3,400.0
3,000.0

2,000.0
500.0

1,500.0
3,000.0

20,100.0
1,750.0
4,750.0

5,000.0
2,000.0

600.0
1,500.0

1,800.0
2,700.0

393.3

169.8
36.0

7.5
18.8

15.0
24.5

25.5
25.0

17.5

223.5
100.0

90.0
33.5

25.0

25.0
0.0

25.0
0.0

68,700.0

39,828.8

10,500.0

10.5

50,318.3

* Member States as of 01.01.2007
** Means that no further request for disbursement are possible (either because the total amount has been disbursed or because the facility has expired)
*** Effective payment date maybe different from maturity date as the Conventions stipulate that if annual payment date is not a business day, payment date will be postponed to the next business day without any impact on the interest 
(1) Regulation establishing the facility stipulating that the outstanding amount of loans to be granted to Member States  shall be limited to EUR 50 billion in principal

10 

 
 
 
 
(b) 

Lending operations to non Member States are covered by the Guarantee Fund for external 
actions. These include MFA, Euratom (Table A3b) and EIB guaranteed lending operations 
to third countries (table A4). 

 European Union (MFA) and Euratom loans to non-member States (EUR million) 

TABLE A3b

Changes in amounts outstanding during six-month period 31.12.2011 to 30.06.2012, broken down by countries and tranches

   COUNTRY

Decision

Date

Availability

of decision

Period

Loan

term

Expiry

date

Loan

situation

Amount

decided

Amount

Operations in 

Amount

outstanding

six-month period

outstanding

(for Request for Funds)

(years)

 - closed (a)

at 31.12.2011

Amounts

Amounts

at 30.06.2012

MFA

BOSNIA AND HERZEGOVINA I

99/325/EC

10.05.99

     1st tranche

     2nd tranche

BOSNIA AND HERZEGOVINA II

02/883/EC

09.11.02

     1st tranche

     2nd tranche

FYROM I

     1st tranche

     2nd tranche

FYROM II

     1st tranche

     2nd tranche

     3rd tranche

     4th tranche

GEORGIA

TADJIKISTAN

     1st tranche

97/471/EC

22.07.97

99/733/EC

08.11.99

97/787/EC

17.11.97

2000/244/EC

20.03.00

closed

SERBIA AND MONTENEGRO * 2001/549/EC

16.07.01

Serbia

Montenegro

SERBIA AND MONTENEGRO * 2002/882/EC

09.11.02

     1st tranche

     Serbia

    Montenegro

     2nd tranche

     Serbia

     Montenegro

     3rd tranche

     Serbia

     Montenegro

ALBANIA

LEBANON

ARMENIA

2004/580/EC

29.04.04

2007/860/EC

21.12.07

2009/890/EC

30.11.09

BOSNIA & HERZEGOVINA

2009/891/EC

30.11.09

closed

15/11/2012

08/08/2012

05/04/2012

open **

SERBIA

UKRAINE IV

UKRAINE V

2009/892/EC

30.11.09

2002/639/EC

12.07.02

2010/646/EC

7.07.10

not yet fixed ***

EURATOM
UKRAINE (Euratom)

94/179/EC

21.03.94
15.03.07
06.10.08
15.10.09

 - partially disbursed (b)

 - disbursed in full (c)

 - not yet disbursed (d)

disbursed

repaid

1629.0

565.0

39.0

19.0

585.0

15

-

15

15

15

15

15

15

15

15

15

15

15

22.12.14

-

16.01.19

9.02.21

27.09.12

13.02.13

15.01.16

30.01.17

04.06.18

23.12.18

24.07.12

30.03.16

17.10.16

15

28.02.18

15

1.09.18

15

4.05.20

15

10

15

23.03.21

4.06.14

27.07.2026

8

12.07.2019

11

29.07.18

(c)

(c)

(c)

(c)

(c)

(c)

(c)

(c)

(c)

(c)

(a)

(b)

(c)

(c)

(c)

(c)

(c)

(c)

(b)

(b)

(d)

(b)

(d)

(d)

(c)
(c)
(c)
(c)

20.0

10.0

10.0

20.0

10.0

10.0

40.0

25.0

15.0

50.0

10.0

12.0

10.0

18.0

110.0

75.0

60.0

225.0

55.0

10.0

30.0

15.0

9.0

50.0

65.0

100.0

200.0

110.0

500.0

EUR equivalent ****
39.0 EUR
22.0 USD
10.3 USD

of USD 83 million

0.0

6.0

10.0

0.0

10.0

10.0

0.0

5.0

6.0

0.0

10.0

12.0

10.0

18.0

0.0

28.0

0.0

223.8

1.2

9.0

1.0

27.0

3.0

13.5

1.5

9.0

25.0

26.0

100.0

43.0
25.3
11.7
6.0

39.0

2.0

3.0

2.0

12.0

2.8
2.0
0.9

0.0

6.0

8.0

0.0

10.0

10.0

0.0

5.0

3.0

0.0

8.0

12.0

10.0

18.0

0.0

16.0

0.0

223.8

1.2

9.0

1.0

27.0

3.0

13.5

1.5

9.0

25.0

65.0

100.0

40.8
23.4
11.2
6.2

TOTAL
* The outstanding amounts of the two countries have been split as of  01.01.11 
following the signature of the loan agreement with Montenegro on 09/02/2010 confirmed by Serbia on 24/11/2010
** Means that the Council decision did not foresee any expiry date and the total amount has not been disbursed
*** Means that the Memorandum of Understanding and the Loan Agreement have not been signed nor have they entered into force
**** Including exchange rate valuation

608.0

39.0

21.8

625.8

11 

 
 
 
 
 
 
 
 
 
TABLE A4

LOAN GUARANTEES TO EIB

Geographical Area

Decision

Date
of decision

Rate
of guarantee

MED. Financial protocols(1)

MED. Horizontal cooperation

1762/92/EEC

TOTAL MED. (3)

C and E Europe I

C and E Europe II

Asia, Latin America I

Asia, Latin America Interim

Asia, Latin America Interim

South Africa

New mandates

FYROM

Bosnia and Herzegovina

Turkey Terra

Mandates 2000-2007

The Baltic Sea basin of Russia

Russia, Belarus, Rep. Of Moldova and 
Ukraine

90/62/EEC(4)

91/252/EEC(5)

93/696/EC(6)

93/115/EEC

96/723/EC

96/723/EC

95/207/EC

97/256/EC(7)

98/348/EC

98/729/CE

99/786/EC

2000/24/EC(8)

2001/777/EC(9)

2005/48/EC(10)

8.03.77

29.06.92

12.02.90

14.05.91

13.12.93

15.02.93

12.12.96

12.12.96

01.06.95

14.04.97

19.05.98

14.12.98

29.11.99

22.12.99

06.11.01

22.12.04

75% (2)

75% (2)

100%

100%

100%

100%

100%

70%

100%

70%

70%

70%

65%

65%

100%

100%

Date of
guarantee
contract
30.10.78/10.11.78

09.11.92/18.11.92

24.04.90/14.05.90

19.01.93/04.02.93

22.07.94/12.08.94

04.11.93/17.11.93

18.03.97/26.03.97

21.10.97

04.10.95/16.10.95

Loans signed

Amount
decided         (minus cancellations)
at 31.12.11
5,533 

6,062 

at 30.06.12

5,533 

1,800 

7,862 

1,000 

700 

3,000 

750 

153 

122 

300 

1,656 

7,189 

912 

493 

2,464 

571 

139 

122 

285 

1,656 

7,189 

912 

493 

2,464 

571 

139 

122 

285 

in EUR million 

Amount outstanding

at 31.12.11
318 

212 

530 

51 

- 

290 

84 

4 

3 

2 

at 30.06.12

293 

163 

456 

37 

- 

253 

75 

3 

2 

2 

25.07.97/29.07.97

7,105 

6,110 

6,110 

1,826 

1,691 

29.07.98/07.08.98

16.06.99/22.06.99

18.04.00/23.05.00

150 

100 

600 

150 

100 

588 

150 

100 

588 

86 

62 

464 

80 

60 

451 

19.07.00/24.07.00 (11)

19,460 

18,524 

18,280 

11,399 

11,310 

06.05.02/07.05.02

21.12.05/09.12.05

100 

500 

85 

230 

19,393 

57,355 

85 

230 

19,998 

57,717 

68 

219 

8,243 

23,331 

66 

225 

9,333 

24,043 

Mandate 2007-2013

2006/1016/EC(12) (13)

19.12.06

65%

01.08.07/29.08.07 (14)

29,484 

TOTAL

71,386 

(1) Including EUR 1,500 million for Spain, Greece and Portugal.
(2) General guarantee of 75% for all credits made available under lending operations under a guarantee contract signed between the Community and the EIB on 30.10.78 and 10.11.78.
(3) The Community has guaranteed EUR 5,497 million, of which EUR 141.5 million were covered by a 100% guarantee for Portugal.
(4)  Poland, Hungary.
(5) Czech Republic and Slovak Republic, Bulgaria, Romania.
(6) Poland, Hungary, Czech Republic and Slovak Republic, Bulgaria, Romania, Baltic States and Albania.
(7) Central and Eastern Europe, Mediterranean, Asia and Latin America, South Africa.
(8) South-eastern Neighbours, Mediterranean countries, Latin America and Asia, Republic of South Africa, Special action Turkey, as amended (2005/47/EC).
(9) A special lending action for selected environmental projects in the Baltic Sea basin of Russia under the Northern Dimension.
(10) A special lending action for certain types of projects in Russia, Belarus,Republic of Moldova and Ukraine.
(11) Restated and amended in 2005.
(12) Pre-Accession countries, Neighbourhood and Partnership countries, Asia and Latin America, Republic of South Africa.
(13) The initial amount  of EUR 25,800 has been increased up to  EUR 29,484 million further to a Council and European Parliament Decision of 13.10.2011 (1080/2011/EU of 25 October 2011), 
granting  an additional mandate of EUR 2,000 million to tackle climate change and an amount of EUR 1,684 million to foster EIB risk policy.

2.5. 

Evolution of risk 

The evolution of risk corresponds to the schedule of the total annual repayments (amount in 
capital  including  interests  due)  under  all  financial  instruments  guaranteed  by  the  Budget.  In 
case of loans to Member States, the risk is directly covered by the Budget. Regarding loans to 
third  countries,  the  risk  is  covered  in  the  first  instance  by  the  Guarantee  Fund  for  external 
actions. 

2.5.1. 

Situation of loans to Member States at 30 June 2012 

With the implementation of the EFSM the total risk towards Member States including BOP, 
Euratom, EIB and MFA lending has drastically increased since 2011.  

EFSM  assistance  for  Ireland  and  Portugal  reached  a  total  of  respectively  EUR  18.4  billion 
and EUR 20.1 billion at 30.06.2012. Total outstanding for BOP loans amounted to EUR 11.4 
billion. 

Regarding Euratom  loans,  no  disbursement  took  place  druing  the  six  first  months  of  2012. 
EUR 10.5 million were reimbursed by Bulgaria so that the outstanding for Member States is 
EUR 383 million. 

Member  States  represent  72%  of  the  Budget  exposure  (cumulated  total  risk  borne  by  the 
Budget,  see  table  A2  of  the  SWD)  with  the  following  breakdown  between  the  financial 
instruments:  

12 

 
 
       
            
            
                
                
       
            
            
                
                
       
            
            
                
                
       
               
               
                  
                  
          
               
               
                     
                     
       
            
            
                
                
          
               
               
                  
                  
          
               
               
                    
                    
          
               
               
                    
                    
          
               
               
                    
                    
       
            
            
             
             
          
               
               
                  
                  
          
               
               
                  
                  
          
               
               
                
                
     
          
          
           
           
          
                 
                 
                  
                  
          
               
               
                
                
     
          
          
             
             
     
          
          
           
           
 
 
Graph A1: Total Annual Risk to the Budget3 relating to Member States at 30.06.20124 
(EUR million) for the period 2012-2018 

2.5.2. 

Situation of loans to third countries 

At 30 June 2012, a total of EUR 1,783 million remained to be disbursed (loans signed but not 
yet  disbursed)  by  the  EIB  under  the  EUR  20,060  million  EIB  external  lending  mandate  for 
2000 – 2007: 

Table A5: Disbursement forecast for EIB loans on general mandate 2000 - 2007 

A. Pre-Accession Countries *
B. Neighbourhood and partnership countries**
C. Asia and Latin America
D. South Africa
Sub-total third countries

Member States*

Ceiling

Loans made available
(minus cancellations) at
30.06.2012***

EUR million

to be disbursed

10,235
6,520
2,480
825

20,060

20,060

7,303
5,905
2,105
817

2,739

18,869

1,061
458
0
0

265

1,783

* The ceiling includes Terra Turkey and Special Action Turkey.
** No ceiling for Member States as the loan operations were decided before enlargement rounds under the Mandate. Mediterranean and
South-Eastern Neighbours ceilings were amended following the enlargements rounds. 
*** Signatures up to 31.07.2008 (end of the Mandate 2000-2007). No additional signatures allowed after this date.
At  the  same  date,  an  amount  of  EUR 10,765  million  remained  to  be  disbursed  under 
commitments made under the EIB external mandate for 2007-2013. 

3 
4 

Based on the amounts due (capital and interest) under operations disbursed at 30.06.2012. 
As of 31 December 2011, the 2012 annual risk for Member States was EUR 1,769 million. 

13 

 
 
 
 
 
                                                 
Table A6: Disbursement forecast for EIB loans on general mandate 2007 - 2013

Ceiling

Loans made available
(minus cancellations) at
30.06.2012

EUR million

to be disbursed

A. Pre-Accession Countries (Climate change included)
B. Neighbourhood and partnership countries
C. Asia and Latin America
D. South Africa

11,048
13,548
3,952
936

29,484

8,132
8,612
2,663
591

19,998

3,646
5,937
1,049
132

10,765

For both mandates (2000-2007 and 2007-2013), loans have to be drawn within 10 years from 
the end of the Mandate. 

Graph  A2:  Total  Annual  Risk  borne  by  the  Budget  related  to  third  countries  (EUR 
million) at 30.06.2012 for the period 2012-2018 

Graph A2  presents  the  result  of  simulations  aiming  at  estimating  the  outstanding  amount 
covered  by  the  Fund  for  the  period  2012  to  2018.  These  simulations  are  based  on 
disbursements of loans signed and disbursed at the reporting date under all EIB mandates. As 
graph A2 illustrates, the weight of MFA and Euratom loans are marginal in the total annual 
risk. 

Payment under the Budget guarantees 

The EU borrows on financial markets and on-lends the proceeds to Member States (balance of 
payment,  EFSM),  and  to  third  countries  (macro-financial  assistance)  or  utility  companies 
(Euratom).  

Procedures  have  been  set  up  to  guarantee  the  repayments  of  the  borrowings  due  by  the  EU 
and also the guarantees given in connection with the EIB financing operations. 

14 

 
 
 
 
 
 
2.5.3.  Borrowing/lending operations 

The loan repayments are scheduled to match the repayments of the borrowings due by the EU. 
If  the  recipient  of  the  loan  is  in  default,  the  Commission  will  first  draw  on  its  own  cash 
resources to ensure a timely repayment of the EU borrowing on the contractual due date. 

Should  the  amounts  needed  for  the  necessary  cash  coverage  exceed,  in  a  certain  period  or 
date,  the  available  Commission's  treasury  balances,  the  Commission  would,  in  accordance 
with Article 12 of Council Regulation 1150/20005, draw on additional cash resources from the 
Member States in order to fulfil its legal obligations towards its lenders.  

In the case of BOP loans, where amounts to be reimbursed can be very high, the beneficiary 
Member  States  are  required  to  transfer  the  amounts  due  to  the  European  Central  Bank  7 
business  days  in  advance  of  the  contractual  due  date.  This  gives  enough  time  for  the 
Commission and Member States to provide for the cash advance to ensure timely repayment 
in case of default. The same process is beeing applied for the EFSM loans with 14 days lead 
time. 

In a second step, the treasury situation would be regularised as follows: 

Euratom and MFA loans 

a) 

b) 

c) 

if the payment delay reaches three months after the due date,: 
-  for loans outside the EU, the Commission draws on the Guarantee Fund to cover 

the default and to replenish its treasury.  

-  for loans inside the EU, the amounts are directly covered by the Budget. 

the Commission might also need to draw on the Budget, most likely by means of a 
transfer, to provide the corresponding Budget line under article "01 04 01 European 
Union guarantees for Union and Euratom borrowing operations and for EIB lending 
operations"  with  the  necessary  appropriations  needed  to  cover  the  default.  This 
method  is  used  when  there  are  insufficient  appropriations  in  the  Fund  or  if  the 
borrower  is  a  Member  State6  and  the  transfers  are  likely  to  require  advance 
authorisation by the budgetary authority.  

The recovered funds may either be re-paid to the General Budget or kept on the GF 
account  (the  next  annual  provisioning  from  the  General  Budget  being  reduced 
accordingly). 

BOP and EFSM loans 

a) 

5 

6 

the  Commission  may need to  propose a transfer or an Amending Budget to budget 
the cash advance under the corresponding budget line "01 04 01 01 European Union 
guarantee  for  Union  borrowings  for  balance-of-payments  support"  or  "01  04  01  03 

Council  Regulation  (EC,  Euratom)  No  1150/2000  of  22  May  2000  (OJ  L  130,  31.5.2000,  p.1) 
implementing  Council  Decision  2007/436/EC,  Euratom  of  7  June  2007  on  the  system  of  European 
Communities' own resources (OJ L 163, 23.6.2007, p. 17). 
The loans (and loans guarantees) to accession countries were covered by the Guarantee Fund until the 
date of accession. From that date, those that remained outstanding ceased to be external actions of the 
Union and are therefore covered directly by the Budget. 

15 

 
 
                                                 
European  Union  guarantee  for  Union  borrowings  for  financial  assistance  under  the 
European financial stabilisation mechanism". 

b) 

The recovered funds will be re-paid to the General Budget. 

2.5.4.  Guarantees given to third parties 

The  EU  provides  a  guarantee  in  respect  of  financing  granted  by  the  EIB  under  the  external 
mandates. When the recipient of a guaranteed loan fails to make a payment on the due date, 
the EIB asks the Commission to pay the amounts owed by the defaulting entity in accordance 
with the relevant guarantee agreement. 

The  guarantee  call  must  be  paid  within  three  months  of  receiving  the  EIB's  request,  either 
from the Fund7 or directly from the Budget should the resources of the Fund be insufficient8. 

The  EIB  administers  the  loan  with  all  the  care  required  by  good  banking  practice  and  is 
obliged to seek the recovery of the payments due after the guarantee has been activated. 

2.5.5.  Default interest penalties for late payment 

(a) 

EU or Euratom loans 

For loans granted by the EU or Euratom, default interest is owed by loan beneficiaries for the 
time between the date at which cash resources are made available by the Budget and the date 
of repayment to the EU.  

(b) 

EIB loans 

For EIB loans, EIB is entitled to default interest which is calculated during the period between 
the due date of a defaulted loan instalment and the date of receipt of the cash resources by the 
EIB from the Commission. From the latter date, default interest is due to the Commission. 

3. 

COUNTRY-RISK EVALUATION 

Third countries representing important risks to the Budget during the second semester 2011, 
and either categorised as “severely indebted” according to criteria set by the World Bank or 
facing  significant  imbalances  in  their  external  or  debt  situation,  are  included  in  the  country 
risk evaluation. 

The  evaluation  presented  below  comprises  short  maroeconomic  analyses  and  tables  of  risk 
indicators.  The  evaluated  countries  are  grouped  in  6  sub-sections:  candidate  countries  (3.1) 

7 

8 

Since  the  entry  into  force  of  the  Regulation  establishing  the  Guarantee  Fund  for  external  actions,  the 
Agreement between the EU and the EIB on the management of the Fund foresees that the Commission 
must  authorise  the  Bank  to  withdraw  the  corresponding  amounts  from  the  Fund  within  three  months 
from  the  date  the  EIB  calls  in  the  guarantee.  Council  Regulation  (EC,  Euratom)  No  480/2009  of 
25 May 2009  establishing  a  Guarantee  Fund  for  external  actions  (codified  version),  the  "Guarantee 
Fund Regulation" (OJ L 145, 10.6.2009, p.10). 
If there are insufficient resources in the Fund, the procedure for activating the guarantee is the same as 
for borrowing/lending operations, see 0 above. 

16 

 
 
                                                 
Candidate  countries,  (3.2)  Potential  candidate  countries,  (3.3)  ENP  countries,  (3.4) 
Mediterranean partners and (3.5) other countries.  

Explanatory notes for country-risk indicators 

Abbreviations and English words used in tables 

S&P: Standard and Poor's 
FDI: Foreign Direct Investment 
GD: Gross Domestic Product 
CPI: Consumer Price Index 
est.: Estimates 
m EUR: EUR million 
bn USD: USD billion 
n.a.: not available 

Standard footnotes used in the table 

1) 

2) 

Includes  only  EU  and  EIB  loans  (outstanding  disbursements)  to  CEEC9,  NIS10  and 
MED11. 

The  higher  the  ranking  number,  the  lower  the  creditworthiness  of  the  country. 
Countries are rated on a scale of zero to 185 or to 100 (the number of countries has 
been reduced from 185 to 100 from January 2011). 185, respectively 100, represents 
the highest risk of default. A given country may improve its rating and still fall in the 
ranking if the average global rating for all rated countries improves. 

3.1. 

Candidate countries 

3.1.1.  Former Yugoslav Republic of Macedonia 

In the first half of 2012, economic output was about 1% lower than a year before, reflecting 
lower  exports  but  also  rather  strong  growth  in  2011.  Private  consumption  remained  stable 
with an increase by nearly 1%, although real disposable income declined. Increasing current 
transfers from abroad, such as workers remittances, income from cross-border trade, foreign 
loans  but  also  higher  FDI  inflows  provided  important  support  for  economic  activity.  As  a 
result  of  the  high  import  content  of  capital  formation,  imports  rose  by  2.7%  in  real  terms, 
which  together  with  declining  exports  resulted  in  a  negative  contribution  of  net  exports  by 
more than 3 percentage points. High-frequency data for the first ten months of 2012 point to 
continued weak growth.  The trade deficit rose by ¾ percentage points of GDP in the first half 
of 2012, while worker remittances further increased to about 10% of the estimated full-year 
GDP, which resulted in a lower current-account deficit at about 2% of GDP, compared to 4% 
the year before. Inflation picked up in mid-2012, increasing by more than 5% year-on-year in 
September  and  October.  This  brought  average  inflation  for  the  first  ten  months  to  3.1%, 
clearly above the Central Bank's inflation target. The main factors for the strong increase were 
agricultural products, but also housing, textiles and energy. The labour market experienced a 
weak  first  quarter  and  a  slightly  better  second  quarter,  resulting  in  a  largely  unchanged 

9 
10 
11 

Central and Eastern European Countries. 
New Independent States. 
Mediterranean countries 

17 

 
 
                                                 
unemployment  rate  in  the  first  half  of  2012  at  31.4%,  compared  to  31.5%  the  year  before. 
Public  finances  registered  a  significantly  weaker-than-expected  revenue  performance  in  the 
first half of 2012. In response to underperforming revenues, the authorities revised the deficit 
target for 2012 from 2.5% to 3.5% of GDP which should allow maintaining spending targets 
largely  unchanged.  The  deficit  target  for  2013  was  also  planned  at  3.5%  of  GDP.  Gross 
external debt rose to 63.8% of GDP by June 2012, up from 60.9% of GDP the year before. 
The  main  reason  is  increased  public  sector  borrowing,  while  private  borrowing  declined 
slightly. In the context of a monetary policy that maintains an informal peg of the domestic 
currency  to  the  euro,  the  exchange  rate  has  remained  largely  unchanged  at  around  61.5 
MKD/EUR. 

Country-risk indicators : The former Yugoslav Republic of Macedonia
Output and prices

2010

2011

2012 (proj)*

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

(1)   See explanatory notes
* ECFIN Autumn 2012 Forecast

3.1.2.  Montenegro 

2.9
32.0
1.6

-2.5

2,566.8
-2.2
158.6
1,715.3
5.2
61.51

4,105.7
58.2
49.8
none
none

283.0
1.5
6.8
11.1

2.8
31.4
3.9

-2.5

3,277.0
-2.7
336.8
2,302.3
5.7
61.53

4,846.6
64.6
44.0
none
none

284.0
1.3
6.1
8.7

0.8
30.8
2.9

-3.5

3,326.1
-3.6
n.a.
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

259.0
1.2
n.a.
7.8

 Precautionary and Liquidity Line 
from 19/01/2011

On track

none
BB
BB+

none
BB
BB+

none
BB
BB+

The  economy  expanded  by  3.2%  in  real  terms  in  2011,  driven  by  the  expansion  of  private 
consumption as well as by the acceleration of exports. However, in the first half of 2012 real 
GDP  declined  by  0.9%  year-on-year,  due  to  lower  contribution  of  net  exports  and  a 
significant fall in industrial output. The negative impact of harsh winter conditions in the first 
quarter of 2012 led real GDP fall by 2.4%, followed by a slightly positive annual growth of 
0.3% in the second quarter. Unilateral use of the euro implies that there is only limited scope 
for  domestic  monetary  policy  instruments.  The  foreign  exchange  risk  was  reduced,  but  the 
external  financing  risks  remained  significant.  Consolidation  efforts  continued,  but  the  weak 

18 

 
 
 
performance of revenues and the activation of some state guarantees in 2011 and in the first 
half of 2012, resulted in consolidated budget deficits of 5.4% and 3.7% of GDP respectively. 
Public  debt  increased  to  46%  of  GDP  in  2011,  and  reached  48%  in  June  2012,  although  it 
remains  primarily  on  concessional  terms,  with  average  interest  rates  and  maturity  at  about 
3.9% and 6.7 years, respectively. In the first half of 2012 the current account deficit increased, 
reaching  20.7%  of  GDP  in  annualised  terms,  or  one  percentage  point  of  GDP  higher 
compared  to  end-2011.  The  deterioration  largely  reflects  trade  dynamics.  The  financial 
account  balance  covered  93%  of  the  current  account  deficit,  while  Central  Bank  reserves 
contributed  with  EUR  15  million  to  close  the  gap.  Net  FDI  contracted  markedly,  by  21% 
year-on-year,  but  still  covered  54%  of  the  deficit,  while  additional  40%  came  from  other 
investments (i.e. bank loans). A cutback in capital inflows, notably on greenfield investments, 
represents  a  major  risk  as  it  would  depress  domestic  demand,  and  further  weaken  fiscal 
performance, given the reliance of indirect tax revenue from imports. 

Country-risk indicators : Montenegro
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

2010

2011

2012 (proj)*

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

2.5
12.2
0.5

-4.9

1,103.6
-24.7
543.1
416.0
3.0
1.00

3,110.1
98.9
3.6
none
none

188.0
1.0
6.0
17.0

3.2
13.2
3.1

-5.4

1,321.5
-19.6
389.1
303.0
2.0
1.00

3,089.2
99.3
3.6
none
none

197.2
0.9
6.4
14.9

none

none

0.2
13.3
3.9

-4.0

1,316.2
-20.1
n.a.
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

200.0
0.9
n.a.
15.2

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

Ba3
BB
none

Ba3 /stable
BB
none

Ba3 /stable
BB- /stable
none

(1)   See explanatory notes
* ECFIN Autumn 2012 Forecast

3.1.3. 

Serbia 

Economic activity deteriorated sharply in early 2012, with negative growth rates of -2.5% y-
o-y  in  the  first  and  -0.8%  y-o-y  in  the  second  quarter.  Flash  estimates  for  the  third  quarter 
point at a continuing recession with a further 2.2% drop in the GDP. On the back of renewed 
pressure  from  food  prices,  affected  also  by  a  drought  in  the  summer,  inflation  accelerated 
strongly,  reaching  10.3%  (y-o-y)  in  September  and  moving  above  the  central  bank  target 

19 

 
 
 
band. The overall uncertainty in the pre-election period, the unchecked fiscal expansion and 
deteriorating external imbalances led to a depreciation of the dinar, which has lost about 10% 
of its value against the euro since the beginning of 2012. In order to stem further depreciation 
of  the  dinar  and  reduce  inflationary  expectations,  the  central  bank  raised  its  main  policy 
interest  rate  in  several  steps  to  10.95%  in  early  November.  In  September,  the  Parliament 
adopted  a  rebalancing  of  the  2012  budget,  targeting  a  much  higher  than  originally  planned 
consolidated  deficit  of  6.7%  of  GDP.  Government  debt  increased  further  in  the  summer 
months and reached 54% of GDP in August. The inflow of net foreign direct investments was 
significant  in  2011  but  turned  negative  in  the  first  half  of  2012.  The  external  debt  rose 
slightly, to about 80% of GDP, as the debt level as expressed in domestic currency increased 
following the dinar depreciation. Foreign exchange reserves of the central bank have fallen. 
However, they still remain at a relatively healthy level of EUR 9.9 billion, covering about 7 
months  of  imports.  The  deteriorating  fiscal  performance,  among  other  factors,  triggered  a 
downgrade of Serbia’s long term sovereign credit rating in August. The completion of the first 
review of the precautionary Stand-By Arrangement with the IMF from September 2011 has 
been postponed because the 2012 budget deviated from the agreed fiscal programme. 

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

Country-risk indicators : Serbia
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

(1)   See explanatory notes
* ECFIN Autumn 2012 Forecast

3.1.4.  Turkey 

2010

2011

2012 (proj)*

1.0
19.2
10.3

-4.7

10,069.5
-7.8
861.4
10,001.6
9.8
105.93

23,763.3
84.7
5.8
none
none

1609.0
8.7
6.8
16.0

1.6
23.0*
7.0

-5.1

11,472.0
-9.6
1,840.1
12,057.7
10.5
106.95

24,101.6
78.9
6.3
none
none

1,959.0
9.2
8.1
17.1

-1.6
26.4
7.3

-6.7

11,781.7
-12.4
n.a.
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

2,096.0
9.5
n.a.
17.8

Stand-By

on track

on track

none

none
BB-
BB-

none
BB
BB-

none
BB- /negative
BB- /negative

Economic  growth  in  Turkey  has  slowed  sharply  from  9.2%  in  2010  and  8.5%  in  2011  to  a 
projected  3%  in  2012  on  the  back  of  contracting  private  consumption  and  investment.  

20 

 
 
 
Inflationary  pressures  have  persisted,  and  headline  inflation  reached  8%  by  October  2012, 
primarily caused by significant increases in food and energy prices and hikes in administered 
prices. On the back of the slowing GDP growth, the fiscal deficit has increased to about 2.5% 
of  GDP  in  2011.  Public  debt  as  a  share  of  GDP  has  continued  to  fall  from  39.2%  of  GDP, 
registered at the end of 2011. The current account deficit has been narrowing in tandem with a 
decreasing  merchandise  trade  deficit,  driven  in  particular  by  the  impact  of  weaker  domestic 
demand. As a result, it was projected at around 8% of GDP in 2012, down from 10% in 2011. 
Turkey's  gross  external  debt  amounted  to  less  than  40%  of  GDP  with  private  external  debt 
representing two thirds of the total. International reserves increased to about EUR 80 billion 
covering around 5 months of imports. The domestic currency has appreciated by about 10% 
against the US dollar and the EUR in 2012. In early November 2012 Fitch Ratings upgraded 
Turkey's long-term foreign currency debt to investment grade.  

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

Country-risk indicators : Turkey
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

(1)   See explanatory notes
* ECFIN Autumn 2012 Forecast

3.2. 

Potential candidate countries  

3.2.1.  Albania 

2010

2011

2012 (proj)*

9.2
12.0
8.6

-3.6

117,781.4
-6.4
5,726.0
83,215.5
7.1
2.00

215,356.0
39.9
28.3
none
none

7429.0
40.2
3.6
6.0

8.5
9.8
6.5

-2.0*

130,703.5
-10.0
9,776.4
84,127.3
5.8
2.33

227,821.0
39.7
23.8
none
none

8,330.0
39.2
3.6
6.4

3.0
7.5
8.0

-2.4

143,381.8
-8.0
n.a.
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.
none
none

8,774.0
39.8
n.a.
6.1

none

none

none

Ba2
BB
BB+

Ba2
BB
BB+

Ba1 /positive
BB /stable
BBB- /stable

Following a contraction of 0.2% year on year in the first quarter of 2012, Albania's real GDP 
grew by an estimated 2% in the second quarter, well below the historical average. In the first 
half of 2012, employment grew by approximately 1%, continuing the decelerating rate which 

21 

 
 
 
started in the second half of 2011. Private non-agriculture sector was the main driver of job 
creation.  Inflation  accelerated  during  the  course  of  2012,  from  an  average  of  slightly  above 
1%  year  on  year  in  the  period  January-March  to  2.7%  in  the  third  quarter  reflecting  higher 
food  prices,  which  account  for  a  substantial  share  in  the  CPI.  The  banking  sector,  the  main 
source of financial intermediation in Albania, remains well capitalised and liquid. However, 
non-performing loans continued to rise and stood at 22.7% in the third quarter of 2012. The 
current account deficit improved in the first half of 2012 as exports of goods turned positive 
in the second quarter which, together with a drop in imports, led to a lower merchandise trade 
gap. In addition, the services account posted a surplus in the first six months of 2012 helped 
mainly  by  strong  inbound  tourism  which  more  than  offset  a  decline  in  remittances.  The 
government  deficit  was  estimated  to  have  reached  around  2%  of  GDP  in  September  2012, 
against  a  planned  deficit  of  3%  of  GDP  for  the  whole  year.  Public  debt  remains  relatively 
high,  with  the  total  debt-to-GDP  ratio  estimated  at  58.6%  at  end-September  2012.  This 
includes some 3.5% of GDP in contingent liabilities from state guarantees.  

Country-risk indicators : Albania
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports (2)

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

(1) See explanatory notes
(2) Ratio of 12 months imports of goods moving average.

3.2.2.  Bosnia and Herzegovina 

2010

2011

2012 (proj)

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

3.8
13.7
3.6

-3.1

2,922.2
-11.5
793.5
1,825.3
6.7
137.48

3,919.1
41.0
9.9
none
none

244.0
1.3
10.9
8.5

3.1
13.3
3.5

-3.5

3,152.9
-12.0
747.2
1,852.4
6.1
140.07

4,599.5
46.5
3.4
none
none

267.0
1.3
5.8
8.5

n.a.
n.a.
n.a.

n.a.

n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

290.0
1.3
n.a.
n.a.

none

none

B1
B+ /stable
none

B1 /stable
B+ /stable
none

B1 /stable
B+ /stable
none

After a mild recovery  from  the  initial effects of the global economic crisis, the economy of 
Bosnia and Herzegovina was facing renewed weaknesses. Real GDP growth reached 1.3% in 
2011  -  slightly  accelerating  from  a  marginal  0.7%  rise  in  the  previous  year  -,  but  the 
indicators available for 2012 suggest that the economic recovery stalled, negatively affected 

22 

 
 
 
by  the  worsened  external  environment.  Industrial  production  fell  by  5.6%  in  the  first  nine 
months of the year. Employment dropped by 0.8% and the officially registered unemployment 
rate climbed up to 44.3% in August 2012, compared with 43.4% a year before. After being on 
a downward trend since mid-2011, the inflation was moderately accelerating in second half of 
2012 (driven by surging food prices), reaching 2.3% in September. In the first half of 2012 the 
repercussions of the worsened external environment were increasingly felt in public finances. 
Tax  revenue  fell  by  0.8%  year-on-year  reflecting  the  downturn  in  economic  activity,  while 
most expenditure categories increased in year-on-year comparison. Following the significant 
expansion  in  2011,  the  current  account  deficit  widened  further  in  the  first  half  of  2012, 
reaching  an  estimated  14.7%  of  GDP.  The  deterioration  was  mainly  driven  by  the  falling 
exports  of  goods,  while  imports  still  grew,  even  though  at  a  significantly  slower  rate.  Net 
inflow of FDI remained low, covering about one third of the current account deficit. The stock 
of  official  foreign  exchange  reserves  fell  by  3.4%  year-on-year  in  the  first  half  of  2012. 
External public debt rose by 5.1% year-on-year, reaching 25% of GDP at the end of June. In 
September,  the  IMF  Board  approved  a  two-year,  SDR  338  million  Stand-By  Arrangement, 
aiming  at  countering  the  effects  of  the  worsening  external  environment,  preserving  fiscal 
sustainability  and  improving  the  resilience  of  the  financial  sector.  Following  the  Board 
approval,  the  first  tranche  of  about  EUR  60  million  was  immediately  disbursed.  The 
international rating agency Moody's revised in July its outlook on Bosnia's sovereign ratings 
to "stable" on the perspectives for an IMF funded programme. 

Country-risk indicators : Bosnia and Herzegovina
Output and prices

2010

2011

2012 (proj)

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

(1)   See explanatory notes

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

0.7
42.7
2.1

-2.5

4,794.5
-10.5
143.6
3,330.5
5.6
1.93

3,256.9
25.6
11.8
none
none

583.0
3.2
18.1
12.4

1.3
43.8
3.7

-1.3

5,331.4
-14.3
302.2
3,333.3
4.9
1.93

3,449.8
26.1
12.4
none
none

666.4
3.1
19.4
13.6

n.a.
n.a.
n.a.

n.a.

n.a.
n.a.
n.a.
n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

761.0
3.5
n.a.
n.a.

Stand-By
July 2009 - July 2012

off-track

off-track

Stand-By
September 2012
on track

B2
B+
none

B2
B
none

B3 /stable
B /stable
none

23 

 
 
 
3.3. 

ENP countries  

3.3.1.  Armenia 

The  economic  activity  in  Armenia  strengthened  in  2012;  for  the  first  half  of  2012  GDP 
growth  was  estimated  at  6.1%,  after  growing  4.7%  in  2011.  It  was  mainly  driven  by  an 
increase  in  private  consumption  and  further  increase  in  exports,  though  the  investment 
continued to weaken. Consumer price growth remained moderate. After year on year inflation 
dropped to 0.5% in May 2012, it rebounded slightly following the increase in world energy 
prices. The inflation rate was expected to remain within the central bank's target of 4% ± 1.5 
percentage points in 2012. The fiscal position continued to improve. The budget deficit was 
expected  to  decline  to  2.1%  of  GDP  in  2012,  from  3.6%  in  2011.  According  to  the  IMF, 
public  debt  was  expected  to  reach  45%  of  GDP  at  the  end  of  2012  from  40.6%  in  2011 
reflecting loans taken from the international community. Close to 90% of the debt continues 
to  be  formed  by  external  liabilities,  indicating  significant  exchange  rate  vulnerability.  The 
external situation remains fragile. The current account deficit was expected to remain close to 
11% of GDP in 2012 (10.9% in 2011). Remittances continued to increase, though at a slower 
pace.  In  the  first  half  of  2012  they  grew  by  9.4%,  against  24.5%  in  2011.  Exports,  mostly 
driven  by  mining  and  agriculture,  increased  by  12.2%  in  the  first  half  of  2012  (in  2011  the 
export growth reached 32.8%). The FDI continued to weaken, in 2011 it shrank by 20.1% and 
in  the  first  half  of  2012  it  was  40%  lower  than  in  the  same  period  a  year  before.  Foreign 
reserves were expected to drop to 3.6 months of next year`s imports in 2012 (from 4.6 months 
of  imports  in  2011)  due  to  the  central  bank's  interventions  to  limit  the  exchange  rate 
fluctuations.  In  June  2012,  the  IMF  Board  successfully  completed  its  fourth  review  of 
Armenia’s  economic  performance  under  the  on-going  three  year  programme  supported  by 
Extended Fund Facility and Extended Credit Facility arrangements. Given that Armenia was 
expected to face substantial financing needs in 2013 and 2014 linked, inter alia, to the external 
debt  payments,  a  new  financing  arrangement  with  the  IMF  was  being  considered  upon  the 
expiry of the current one (in mid-2013). 

24 

 
 
Country-risk indicators : Armenia
Output and prices

Real GDP growth rate
Unemployment (end of period)*
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

2010

2011

2012 (proj)

2.2
19.0
9.4

-4.5

1,442.3
-14.8
423.2
1,315.8
4.8
476.4

4,759.3
65.6
21.6
none
none

n.a.
n.a.
n.a.
n.a.

4.7
18.4
4.7

-3.6

1,782.5
-10.9
321.3
1,317.9
4.5
504.6

5,615.6
70.7
19.4
none
none

100.6
0.5
2.2
6.2

6.1
17.4
3.0

-2.1

2,004.5
-10.5
241.0
1,110.6
3.6
527.45

5,700.9
67.7
24.6
none
none

101.0
0.5
1.8
5.0

Extended Fund Facility & Extended Credit Facility
from June 2010
on track

on track

on track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

Ba2
none
BB- /stable

Ba2 /negative
none
BB- /stable

Ba2 /negative
none
BB- /stable

(1)   See explanatory notes
*Integrated Living Condition Survey
Sources: Central Bank of Armenia, National Statistical Service of Armenia, Commission, IMF, Moody`s, Fitch

3.3.2.  Ukraine 

Ukraine's  economy  was  increasingly  affected  by  a  negative  global  environment  in  2012. 
Following  strong  growth  at  4.2%  of  GDP  in  2010  and  5.2%  of  GDP  in  2011,  real  GDP 
growth was expected to slow to about 1% in 2012, as a consequence of declining industrial 
production, weaker agricultural output and tight credit conditions. In the absence of a strong 
global  economic  recovery  leading  to  higher  external  demand,  real  growth  in  2013  was 
expected to remain below potential. Low food prices helped keeping inflation under control. 
Headline inflation was forecasted to reach 7.4% at year end of 2012, after 9.1% and 4.6% in 
December 2010 and 2011 respectively. Ukraine's fiscal deficit exceeded the target agreed with 
the  IMF  in  2012,  which  expected  it  to  increase  to  5.3%  of  GDP  in  2012  (up  from  4.2%  of 
GDP in 2011), mainly as a result of authorities' refusal to increase gas tariffs for households 
and  utilities  to  cost-recovery  levels  as  well  as  of  increased  government  spending  before  the 
October  2012  elections.  After  a  marked  rise  following  the  2008-09  crisis,  public  debt  has 
stabilised at around 36-40% of GDP in 2011-2012. The current account deficit, already high, 
grew further in 2012, reaching a forecasted estimated 6.4% of GDP (up from 5.5% in 2011). 
Currency reserves declined to USD 30 billion (EUR 23 billion) in September 2012. Ukraine 
received  no  disbursements  under  the  IMF  standby  arrangement  in  2012,  as  authorities  have 
not  reached  agreement  with  the  Fund  on  gas  prices  and  the  budget  parameters.  As  a 
consequence,  the  EUR  610  million  macro-financial  assistance  made  available  by  the 

25 

 
 
 
European Union remained  on  hold, despite reaching an agreement on the policy conditions. 
Progress in the implementation of structural reforms to boost competitiveness has been slow, 
and  FDI  remains  very  weak  in  regional  comparison.  Public  administration  and  public 
financial  management  remained  largely  unreformed  and  non-transparent,  weakened  by  red 
tape and prone to corruption. 

Country-risk indicators : Ukraine
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance*

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

2010

2011

2012 (proj)

4.2
8.8
9.4

-5.8

51,020
-2.2
4,349
26,108
5.7
10.5

88,605
86
35.77
none
none

200.0
1.1
0.2
0.4

5.2
7.9
4.6

-2.7

58,461
-5.9
5,384
24,460
3.9
10.5

98,610
76.4
n.a.
none
none

247.2
1.2
0.3
0.4

1.0
7.8
7.4

-3.3

61,799.0
-6.4
4,846
20,769
2.8
11.50

93,468
69.8
n.a.
none
none

243.0
1.1
0.3
0.4

Stand-By 15.2bn USD
28 July 2010 - 27 December 2012 
off track

off track

on track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

B2
B+
B

B2 /negative
B+
B /stable

B2 /negative
B+ /negative
B /stable

(1)   See explanatory notes
*does not include the deficit of state-owned Naftogas (approx. 2% of GDP in 2012)

3.4.  Mediterranean partners 

3.4.1.  Egypt 

Economic growth in Egypt continued to be affected by uncertainties triggered by the January 
2011 revolution. Real GDP growth increased only slightly to 2.2% in the 2011/12 fiscal year 
(FY)  ending  in  June  2012,  after  1.8%  a  year  earlier.  Recent  growth  trends  point  to  some 
degree of stabilisation of the economic situation. The FY 2011/12 fiscal deficit stood at 10.8% 
of GDP – up from 9.7% the year before. While the FY 2012/13 budget foresaw a reduction of 
the  deficit  to  7.6%  of  GDP,  this  figure  was  likely  to  be  missed,  as  an  economic  and  social 
reform programme would take time to be implemented. In the medium-turn, the programme, 
in  particular  through  a  reformed  system  of  energy  subsidies,  to  be  implemented  by  spring 
2013,  could  bring  the  deficit  down  to  3.8%  of  GDP  while  decreasing  gross  public  debt  to 
about 70% by FY 2016/17 (from 86.1% of GDP in 2011/12). On the external side, the current 
account deficit deteriorated slightly to 3.4% of GDP in FY 2011/12, although it was expected 

26 

 
 
 
to stabilise in FY 2012/13. The deterioration was primarily due to the increasing import price 
of commodities, namely oil, as well as a significant drop in tourism receipts, despite resilient 
Suez Canal revenues, and a large rise in remittances. Egypt’s outflow of portfolio investments 
has not been contained and foreign direct investment inflows continue to be muted. The above 
developments  have  led  to  a  quick  depletion  of  the  central  bank’s  net  international  reserves. 
However,  reserves  have  stabilised  at  approximately  USD  15  billion  between  February  and 
November  2012.  Negotiations  on  a  USD  4.8  billion  Stand-By-Arrangement  with  the 
International Monetary Fund were launched in November 2012.  

Country-risk indicators : Egypt
Output and prices

Real GDP growth rate
Unemployment (end of period)*
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

2010

2011

2012 (proj)

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(EG£ per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

5.1
9.2
10.7

-8.0

35,751.6
-2.0
5,097.8
26,998.6
6.6
7.8

26,363.4
16.3
6.8
none
none

1.8
12.1
11.8

-9.7

33,929.0
-2.6
1,572.3
13,760.8
3.3
8.3

26,575.0
14.6
10.0
none
none

2,178.0 
11.8 
7.3 
5.8 

2,037.0 
9.6 
8.3 
5.8 

2.2
12.7
7.3

-10.8

31,467.0
-3.4
1,968.0
11,538.0
3.0
7.70

28,007.0
14.0
n.a.
none
none

1,959.0
8.9
7.0
6.2

no

no

Stand-By***

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

Ba1
BB+
BB+

B2
B+
BB-

B2 /negative
B /negative
B+ /negative

source: Economist Intelligence Unit Country Report Egypt, October 2012

(1)  Fiscal year ends 30th June
*
** The Government withthrew its request for an IMF programme in mid 2011. Discussions were renewed in early 2012.
*** The Stand-By was still being negotiated as of mid-November 2012

3.4.2. 

Jordan 

Despite  the  positive  economic  spillovers  from  the  Gulf  Cooperation  Council  countries,  the 
fiscal and balance of payments position of Jordan deteriorated in 2012, reflecting higher oil 
prices, the impact of regional tensions on inward investment, and the gas supply disruptions 
from Egypt that forced to increase the import of more expensive fuels. The macroeconomic 
situation  improved  only  in  the  second  half  of  2012,  following  a  USD  2  billion  adjustment 
program with the IMF, thereby contributing to a forecasted real GDP growth of 3% for 2012 
against  2.6%  in  2011.  As  a  result,  consumer  price  inflation  was  projected  to  accelerate  to 
4.4% on average in 2012 from 3.3% in 2011. The negative shocks to the energy sector had a 
significant  impact  on  public  finances,  including  through  the  losses  of  the  state-owned 

27 

 
 
        
        
             
               
               
               
               
               
 
electricity  power  company  (estimated  at  USD  2  billion).  The  fiscal  situation  was  further 
aggravated by the continuing Syria crisis that resulted in an increasing flow of refugees. By 
the end of 2012, the fiscal deficit was projected to reach 6.5% of GDP (against 5.7% of GDP 
in  2011)  and  the  public  debt  75.2%  of  GDP  (against  66.8%  of  GDP  in  2011).  On  external 
balances, the current account deficit (excluding grants) was forecasted to stabilise in 2012 at 
the 2011 level of 19% of GDP as the increased energy import bill was largely offset by the 
overall  rebound  of  tourism  and  remittances.  However,  the  overall  balance  of  payments 
position was projected to deteriorate in 2012, broadly due to a significant slowdown in inward 
investment,  notably  in  the  first  half  of  the  2012,  which,  at  the  same  time,  contributed  to  a 
sizeable  reduction  of  foreign  exchange  reserves  (40%  in  the  first  6  months  of  2012).  Soon 
after  the  events  of  the  Arab  Spring,  major  rating  agencies  downgraded  Jordan's  sovereign 
ratings,  reflecting  concerns  about  the  economic  impact  of  the  regional  unrest.  Moody's 
lowered  the  government's  local  currency  bond  rating  to  Ba2  with  a  negative  outlook  from 
Baa3 in February 2011. Standard & Poor's revised the outlook on long-term foreign currency 
and  local  currency  ratings  to  negative  in  2011.  Under  the  pressure  of  an  increasing  energy 
import bill,  broadly  related to  supply disruptions  of natural gas from Egypt, the  IMF Board 
approved  in  early  August  2012  a  USD  2  billion  (800%  of  quota)  36-month  Stand-By 
arrangement with Jordan. The programme was relatively frontloaded, with 300% of quota to 
be paid out in 2012.   

28 

 
 
(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

Country-risk indicators: Jordan
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

(*) latest estimates
(1) See explanatory notes

3.4.3.  Lebanon 

2010

2011

2012 (proj)

2.3
12.5
6.1

-5.6

5,282.4
-7.1
1,264
9,394
7.4
0.947

4,909
24.6
4.9
none
none

395.0
2.1
8.0
7.5

no

Ba2
BB
none

2.6
12.9
3.3

-5.7

5,750.0
-19.0
1,064
7,714
6.0
0.917

4,601
21.9
n.a.
none
none

420.0
2.0
9.1
7.3

no

3.0
11.4
4.4

-6.5

6,469
-18.9
1,236
5,810
4.0
0.908

5,076
20.8
n.a.
none
none

457.0
2.1
9.0
7.1

Stand-By
August 2012
on track

Ba2 /negative
BB
none

Ba2 /negative
BB+ /negative
none

The  Lebanese  economy  continued  to  be  seriously  affected  by  the  conflict  in  Syria,  in 
particular through disruptions in trade of goods and services (e.g. tourism). Real GDP growth, 
which dropped from 7% in 2010 to 1.5% in 2011, was projected to only partially recover in 
2012  to  2%.  Consumer  prices  decreased  in  2011  to  3.1%  y-o-y  compared  to  5.1%  in  2010, 
curbed  by  the  halving  of  the  fuel  excise  in  February  2011,  but  was  expected  to  increase 
sharply  at  the  end  of  2012  to  10.1%,  mirroring  continued  high  global  food  and  fuel  prices. 
The fiscal situation remained vulnerable and there was a great need for fiscal consolidation. 
The central government deficit, 6.1% of GDP in 2011, was expected to increase to 7.9% in 
2012. Fiscal reforms were unlikely due to political disagreements both within the Cabinet and 
in the Parliament. Public debt remained among the highest in the world at 134% of GDP in 
2011, though it was expected to decrease to 132% in 2012, following recent years' trend of 
steady decline. Lebanon's widening trade deficit, combined with a negative net income due to 
low  returns  on  foreign  reserves  and  high  external  debt  payments,  only  partly  mitigated  by 
remittances, translated into a large current account deficit (14% of GDP in 2011). The central 
bank maintained large foreign exchange reserves (EUR 27.1 billion at end-October 2012) to 
protect financial stability and give credibility to the currency peg against the US dollar. The 
external debt-to-GDP ratio remained among the highest in the world at 174% in 2011. About 

29 

 
 
 
80%  of  external  debt  consisted  of  short-term  non-resident  deposits  in  the  banking  sector, 
however, these deposits, owned by the Lebanese diaspora, have demonstrated high resilience 
in  crisis.  Bank  deposits  continued  to  grow  in  the  first  half  of  2012  and  exceeded  300%  of 
GDP  at  the  end  of  June  2012.  No  IMF  arrangement  was  foreseen  in  Lebanon  at  the  end  of 
2012. Long-term foreign currency ratings remained unchanged in first 10 months of 2012. 

Country-risk indicators : Lebanon
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

Central government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves (end of period) 

In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

2010

2011

2012 (proj)

7.0
n.a.
5.1

-7.7

18,556.2
-9.6
2,861.3
22,451.7
10.7
1,997.4

46,400.0
167.2
21.2
none
none

598.0
3.2
1.4
16.6

1.5
n.a.
3.1

-6.1

18,821.8
-14.0
1,962.1
24,654.1
11.0
1,948.6

52,400.0
173.8
20.0
none
none

594.8
2.8
1.3
3.2

none

2.0
n.a.
10.1

-7.9

20,506.8
-16.2
n.a.
27,247.7
11.2
n.a.

56,500.0
172.3
22.3
none
none

619.0
2.8
1.1
3.0

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

B1 /stable
B
B /stable

B1 /stable
B
B /stable

B1 /stable
B
B /stable

(1)   See explanatory notes
Sources: IMF, EIU

3.4.4.  Morocco 

The Moroccan economy was expected to slow down markedly in 2012, mainly due to a poor 
harvest,  with  GDP  growth  estimated  at  2.4%,  down  from  5%  a  year  earlier.  However, 
assuming  an  improved  agricultural  sector  performance,  GDP  was  forecasted  to  grow  above 
4% in both 2013 and 2014, with potential growth increasing thanks to sound macroeconomic 
policies  and  a  better  business  climate.  Inflation  remained  subdued  at  approximately  2%,  as 
government subsidies on energy and food keep prices artificially low. Due to the significant 
fiscal cost of price subsidies, which contributed to an estimated 7.5% of GDP deficit in 2012, 
a  gradual  reform  of  the  subsidies  system,  increasing  inflation  in  the  medium  term,  was 
unavoidable. Public debt continued its upward trend, increasing to a forecasted 72.2% of GDP 
in 2012 after 64.7% of GDP in 2011. However, this forecast was subject to downside risk due 
to  its  dependence  on  the  Euro-area  economies,  where  weak  performance  would  affect 
Moroccan  exports  as  well  as  remittances.  Monetary  policy  has  been  slightly  expansionary, 
while remaining focussed on controlling inflation.  The exchange rate continues to be tightly 

30 

 
 
 
managed in a corridor against a basket of currencies, despite pressure from exporters to float 
the  exchange  rate  to  improve  the  terms  of  trade.  Morocco's  current  account  deficit  was 
expected  to  remain  large  at  about  7.8%  of  GDP  in  2012.  Apart  from  weaker  exports,  the 
current account was affected by higher import prices of energy and food commodities. In the 
medium  term,  the  current  account  deficit  was  set  to  stabilise  on  a  lower  level,  thanks  to 
increased domestic production and fiscal consolidation. The current account deficit was partly 
financed by the resilient capital account surplus, including substantial FDI flows. The level of 
total  external  debt  remained  relatively  stable  at  31%  of  GDP.  Gross  foreign  reserves  were 
expected to decrease by about 15% to USD 17.2 billion until end 2012. 

Country-risk indicators : Morocco
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(MAD per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

Type

(Date)
On track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

(1)   See explanatory notes

3.4.5. 

Syria 

2010

2011 est

2012 (proj)

3.7
9.1
2.2

-4.4

23,736.0
-4.3
982.5
17,255.3
5.7
11.2

17,659.0
24.7
8.7
none
none

2,425.0
13.1
12.1
8.0

4.9
8.9
0.9

-6.9

24,739.0
-8.0
1,391.3
16,254.0
4.9
11.1

18,452.0
23.6
10.7
none
none

2,483.5
11.7
10.5
7.1

2.9
8.8
2.5

-6.1

26,945.0
-7.8
1,969.0
13,543.0
4.0
11.00

18,866.0
24.4
n.a.
none
none

2,534.0
11.5
13.4
9.4

 no 

 no 

Precautionary 
Liquidity Line 
4.12 SDR
August 2012
on track

Ba1 /stable
BBB-
BBB-

Ba1 /stable
BBB-
BBB- /stable

Ba1 /stable
BBB- /negative
BBB- /stable

Though reliable figures were in scarce supply, it was clear that growth has been negative as a 
result of a sharp slowdown in trade, tourism and private investment, as well as the destruction 
of  infrastructure.  Consumer  prices  rose  to  39.5%  y-o-y  in  August  according  to  the  Syrian 
Central  Bureau  of  Statistics.  This  rise  mainly  consisted  of  price  increases  in  food,  housing, 
utilities and fuel due to a combination of sharp reductions in their supply and alleged printing 
of money by the central bank to pay for state salaries. The 2013 budget foresaw a 4% nominal 
increase  in  expenditure,  while  leaving  out  information  on  revenue  and  deficit.  However,  it 
was  clear  that  the  main  sources  of  revenue  have  been  significantly  affected  by  the  conflict, 

31 

 
 
 
including  oil  exports  (which  constituted  25%  of  revenue  in  2010)  and  customs  revenue  on 
imports. The current value of Syria's foreign exchange reserves were difficult to estimate. The 
central  bank  claimed  on  5  October  that  they  amounted  to  USD  15.1  billion  at  the  end  of 
August,  which  would  entail  a  modest  USD  4.7  billion  drop  since  June  2011,  the  latest 
available IMF data. However, considering the sharp drop in export revenue combined with an 
increase  in  import  costs  since  June  2011,  as  well  as  the  absence  of  any  major  net  capital 
inflows,  the  drop  in  reserves  should  have  been  considerably  larger.  The  Economist 
Intelligence Unit estimated that official reserves  were  more  likely  to  amount  to  much  less  - 
close  to  USD  5  billion  at  the  end  of  2012,  which  would  be  equivalent  to  4.8  months  of 
imports.  Despite  efforts  to  maintain  the  exchange  rate,  the  Syrian  pound  has  depreciated 
against the EUR by some 44% between March 2011 and September 2012. 

Country-risk indicators : Syria
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal) 
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

2010

2011

2012 (proj)

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(m EUR)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

3.2
8.4
6.3

-3.2

10,100.0
-3.9
1,000.0
13,700.0
9.4
62.7

n.a.
n.a.
n.a.
none
none

796.0
4.3
4.3
14.6

-2.0
n.a.
6.0

-8.0

n.a.
-6.1
n.a.
n.a.
n.a.
65.2

n.a.
n.a.
n.a.
none
none

728.0
3.4
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.

n.a.
n.a.
n.a.
n.a.
n.a.
89.9

n.a.
n.a.
n.a.
none
none

690.0
3.1
n.a.
n.a.

none

none
none
none

none
none
none

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

none
none
none

(1)   See explanatory notes

3.4.6.  Tunisia 

Tunisia experienced a severe recession in 2011 as a result of the regional and domestic crisis, 
but  signs  of  a  rebound  emerged  already  in  early  2012  with  tourism  and  foreign  investment 
picking  up,  industrial  production  strengthening  and  a  gradual  growth-supporting  fiscal 
expansion favouring public investment. Real GDP was forecasted to grow by 2.7% in 2012 
after  contracting  by  1.8%  in  2011  and  inflation  to  pick  up  to  5%  on  average in  2012  (from 
3.5% in 2011) on the back of stronger domestic demand and rising commodity prices. In light 
of  these  developments,  the  Central  Bank  stepped  up  with  monetary  tightening,  allowing  a 
0.5% increase in the monthly average interbank rate. On the fiscal front, public finances came 

32 

 
 
 
under  further  strain  throughout  the  2012,  largely  due  to  persistently  high  current  budget 
spending, that contributed to an expected doubling of the budget deficit (to 6.4% of GDP) in 
2012  and  to  a  further  increase  in  the  level  of  external  debt  (forecasted  at  53.7%  of  GDP  at 
end-2012  as  compared  to  51%  of  GDP  at  end-2011).  On  the  external  side,  the  rebound  of 
tourism and (to a lower extent) remittances, contributed to a slight improvement in the current 
account position, despite the widening trade deficit; the current account deficit thus forecasted 
to narrow to 7% of GDP in 2012, as compared to 7.3% of GDP in 2011. Net foreign direct 
investments  rebounded  from  0.9%  of  GDP  in  2011  to  forecasted  2.5%  of  GDP  in  2012, 
allowing  a  partial  recovery  of  international  reserves  after  their  25%  drop  in  2011.  Reserves 
stood  at  EUR  6.3  billion  at  mid-November  2012  (representing  4  months  of  imports),  a 
comfortable level according to the IMF. Of the three main rating agencies, only S&P further 
downgraded  Tunisia’s  sovereign  rating  in  2012  (from  BBB-  to  BB  in  May).  Yet,  Tunisia 
maintained the  investment-grade category ratings. Despite the  macroeconomic  improvement 
throughout  2012,  downside  risks  remain  a  concern,  given  regional  uncertainties,  the  global 
economic dynamics and the outlook in the EU, Tunisia’s main trading and investment partner. 
While contacts with the IMF have intensified greatly, no request for an IMF arrangement has 
been  submitted  in  2012.  To  meet  the  external  and  fiscal  financing  needs  of  2013,  national 
authorities  intend  to  further  mobilise  foreign  exchange  reserves  and  to  borrow  both 
domestically and from abroad, including from Arab Funds.  

Country-risk indicators : Tunisia
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

(%)
(% labour force)
(% change)

General government balance (inc. grants)

(% of GDP)

Balance of payments

Exports of goods and services f.o.b.
Current account balance (exc. grants)
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

(1)   See explanatory notes

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

33 

2010

2011

2012 (proj)

3.0
13.0
4.4

-1.0

12,399
-4.8
987
7,169
5.1
1.87

16,192
48.5
10.5
none
none

2220.0
12.0
15.1
17.1

-1.8
19.0
3.5

-3.2

12,811
-7.3
299
5,390
3.8
1.94

16,684
51.0
11.7
none
none

2,355.4
11.1
13.6
13.2

2.7
18.8
5.0

-6.4

14,210
-7.0
909
6,390
4.0
2.00

18,861
53.7
10.4
none
none

2,373.0
10.8
12.6
16.7

no

no

no

Baa2
BBB 
BBB 

Baa3 /negative Baa3 /negative

BBB-

BB /stable

BBB- /negative BBB- /negative

 
 
 
3.5. 

Other countries 

3.5.1. 

South Africa 

While  GDP  contracted  by  1.5%  in  2009  before  recovering  in  2010  (+2.9%)  and  2011 
(+3.1%),  the  South  African  economy  was  expected  to  experience  slightly  slower  growth  in 
2012, around 2.6%. Inflation (CPI y-o-y) seems to be stabilising, coming down from 6.3% in 
December  2011  to  an  expected  5.2%  in  December  2012.  While  the  repurchase  rate  was 
reduced by 50 basis points to 5% in July 2012 after having been constant for the preceding 20 
months,  there  appears  to  be  scope  for  further  cuts  in  interest  rates:  monetary  policy  could 
provide a short-term stimulus without jeopardising annual inflation, which the Central Bank 
intends  to  maintain  below  6%  (and  above  3%).  As  a  result  of  subdued  global  growth  and 
sluggish  domestic  demand,  core  inflation  should  be  easily  contained,  unless  sudden  rises  in 
food  and  fuel  prices  drive  inflation  upward.  Fiscal  policy  should  remain  relatively  loose  in 
2012 and 2013, with expenditure in infrastructure, public services and social welfare likely to 
increase in the run-up to the 2014 presidential elections. Resort to external debt should remain 
marginal, as public-sector borrowing essentially relies on domestic markets. Although South 
Africa's public debt burden continues to be manageable overall, it has increased rapidly in the 
past  few  years  (with  net  public  debt  growing  from  27.2%  of  GDP  in  2008  to  an  estimated 
43%  of  GDP  in  2012).  As  debt-service  costs  rise,  fiscal  management  will  become  more 
challenging  and  any  additional  debt  might  further  damage  investor  confidence.  Two  rating 
agencies  have  already  lowered  South  Africa's  foreign  currency  long-term  government  bond 
rating in September and October 2012 - a sign that the country's creditworthiness was being 
affected by perceived uncertainties related to growing social tensions, declining institutional 
strength and limited flexibility for counter-cyclical policy actions. 

34 

 
 
Country-risk indicators : South Africa
Output and prices

Real GDP growth rate
Unemployment (end of period)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance

Balance of payments

Exports of goods and services f.o.b.
Current account balance
Net inflow of foreign direct investment
Official reserves, including gold (end of period) 
In months of subsequent year's imports

Exchange rate (average)

External debt

External debt (end of period)
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

2010

2011

2012 (proj)

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

2.9
24.9
3.4

-5.0

61,977.6
-2.9
923.9
32,017.1
4.4
10.4

42,277.1
14.3
10.8
none
none

1087.0
5.9
2.0
1.4

3.1
24.9
6.4

-4.2

69,775.7
-3.2
4,109.8
35,668.7
4.1
9.8

41,135.6
12.9
9.7
none
none

1,304.0
6.1
3.2
1.9

2.6
24.3
5.2

-5.5

72,287.7
-5.9
2,861.6
37,144.6
5.6
10.5

39,890.0
13.9
5.7
none
none

1,300.0
5.9
3.3
1.8

no

no

no

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

A3
BBB+
BBB+

A3 /negative Baa1 /negative
BBB /negative
BBB+ /negative

BBB+
BBB+

(1)   See explanatory notes

3.5.2.  Tajikistan 

Tajikistan  safeguarded  firm  growth  rates  and  resilience  to  the  global  crisis,  and  its  growth 
projections remained broadly favourable. GDP rose by 7.4% in 2011 (year-on-year) and was 
expected to expand by another 6.8% in 2012. The outlook was subject to downside risks due 
to  the  expected  global  and  regional  slowdown,  notably  in  Russia,  and  commodity  price 
developments,  i.e.  weak  global  commodity  demand  and  rising  food  prices.  Inflation  (CPI 
annual average) reached 12.4% in 2011, but it was likely to recede to 6% in 2012 reflecting 
the  developments  of  global  food  and  energy  prices.  The  damage  to  export  competitiveness 
from high inflation in 2011 was partly offset by currency depreciation. The tax base remained 
narrow,  with  a  large  share  of  revenue  still  linked  to  the  performance  of  the  aluminium  and 
cotton sectors, which presents an ongoing risk to the government’s fiscal targets. The budget 
deficit, including public investment programmes, was expected to increase to 2.9% of GDP in 
2012 with its composition reflecting a gradual shift to higher social spending, which was low 
even by regional levels.With one-half of labour force working abroad, remittances were the 
major  driver  of  growth  in  Tajiskistan.  According  to  the  IMF,  remittances  from  Russia 
accounted  for  45%  of  GDP  in  the  second  quarter  of  2012.  Tajikistan's  export  preformance 
depends on sales of aluminium, cotton and electricity. A severe fall of cotton and aluminium 
prices  in  2012  was  likely  to  reduce  export  revenues,  while  rising  global  prices  of  food  and 

35 

 
 
 
energy  were  expected  to  raise  the  import  bill.  As  the  deteriorating  trade  deficit  is  offset  by 
large  remittances  flows,  Tajikistan  had  a  broadly  balanced  current-account  position  which 
was  set  to  deteriorate  slightly  to  -0.4%  GDP  in  2012  from  a  surplus  of  0.6%  in  2011. 
Tajikistan's external debt was expected to decline from 32.1% of GDP in 2011 to 31.2% GDP 
in 2012, nevertheless the country's external position remained fragile, especially given a low 
level of international reserves (about 1.7 months of imports in 2012). The three-year Extended 
Credit Facility (ECF) arrangement (SDR 104.4 million) with Tajikistan, which was originally 
approved  by  the  IMF’s  Executive  Board  in  2009  and  subsequently  augmented  in  2010, 
expired  in  May  2012.  Given  the  programme’s  role  in  maintaining  macroeconomic  stability, 
the  authorities  have  expressed  interest  in  a  continued  engagement  with  the  IMF.  So  far 
Tajikistan's  performance  in  implementing  sound  economic  policies  was  mixed,  but  both 
parties expressed interest in adopting a new program. 

Country-risk indicators : Tajikistan
Output and prices

Real GDP growth rate - IMF
Unemployment
Inflation rate (CPI) (Dec/Dec) - IMF

Public finances

General government balance

Balance of payments - IMF

Exports of goods 
Current account balance 
Net inflow of foreign direct investment
Gross international reserves, (end of period) 
In months of subsequent year's imports 

Exchange rate (end of period) 

External debt - IMF

Total public and publicly guaranteed debt
External debt/GDP
Debt service/exports of goods and services
Arrears (on both interest and principal)
Debt relief agreements and rescheduling

Indicators of EU exposure

EU exposure (capital and interest due)
EU exposure/total EU exposure
EU exposure/external debt
EU exposure/exports of goods and services

IMF arrangements

Type
(Date)
On track

Indicators of market's perception of creditworthiness

Moody's long-term foreign currency rating (end of period)
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)

(1)   See explanatory notes

(%)
(% labour force)
(% change)

(% of GDP)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(per EUR)

(m EUR)
(%)
(%)
(%)
(m EUR)

(m EUR)
(%) (1)
(%)
(%)

2010

2011

2012 (proj)

6.5
n.a.
6.5

-3

448.0
-0.3
12.0
359.0
1.5
5.81

1,441
33.9
7.3
none
none

29.0
0.2
2.2
6.5

7.4
n.a.
12.4

-2.1

380.0
0.6
13.0
411.0
1.6
6.42

1,504
32.1
5.9
none
none

28.5
0.1
1.9
6.8

6.8
n.a.
6.0

-2.9

387.5
-0.4
39.0
515.0
1.7
n.a.

1,759
31.2
10.4
none
none

16.0
0.1
0.9
4.1

Extended Credit Facility
April 2009 -  May 2012
on track

none
none
none

on track

none
none
none

on track

none
none
none

36