COMMISSION STAFF WORKING DOCUMENT Accompanying the document REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL on guarantees covered by the general budget - Situation at 31 December 2014
Date: 2015-07-31
Institutions: Directorate-General for Economic and Financial Affairs, European Commission
Subjects: EIB loan, EU Member State, Euratom loan, budgetary reserve (EU), credit guarantee, economic stabilisation, financial aid, general budget (EU), macroeconomics, third country

EUROPEAN 
COMMISSION 

Brussels, 31.7.2015  
SWD(2015) 148 final 

COMMISSION STAFF WORKING DOCUMENT 
Accompanying the document 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

on guarantees covered by the general budget - Situation at 31 December 2014 

{COM(2015) 373 final} 

EN 

   EN 

 
 
 
 
  
 
Table of Contents 

1. 

2. 

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

Overview of capital loan operations covered by the EU guarantee ............................. 5 

2.1. 

Loan operations covered by the EU budget guarantee................................................. 7 

2.1.1.  EU loan operations to Member States.......................................................................... 7 

2.1.2.  EU loan operations to non-Member States .................................................................. 8 

2.1.3.  Guarantees given to the EIB ........................................................................................ 9 

2.2. 

2.3. 

Cumulative and annual EU budget guarantee exposures........................................... 11 

Evolution of risk......................................................................................................... 13 

2.3.1.  EU loans operations to Member States ...................................................................... 13 

2.3.2.  EU loans operations to non-Member States............................................................... 13 

2.3.3.  Guarantes given to the EIB ........................................................................................ 14 

2.4. 

Payment under the EU budget guarantees ................................................................. 15 

2.4.1.  EU loan operations..................................................................................................... 15 

2.4.2.  Guarantees given to EIB ............................................................................................ 16 

2.4.3.  Default interest penalties for late payment................................................................. 17 

3. 

Country-risk evaluation.............................................................................................. 17 

3.1. 

Member States............................................................................................................ 18 

3.1.1.  Bulgaria ...................................................................................................................... 18 

3.1.2.  Hungary...................................................................................................................... 19 

3.1.3. 

Ireland ........................................................................................................................ 21 

3.1.4.  Latvia ......................................................................................................................... 22 

3.1.5.  Portugal ...................................................................................................................... 23 

3.1.6.  Romania ..................................................................................................................... 25 

3.2. 

Candidate countries.................................................................................................... 26 

3.2.1.  Former Yugoslav Republic of Macedonia ................................................................. 26 

3.2.2.  Montenegro ................................................................................................................ 28 

3.2.3.  Serbia ......................................................................................................................... 29 

2 

 
 
 
3.2.4.  Turkey ........................................................................................................................ 30 

3.3. 

Potential candidate countries...................................................................................... 32 

3.3.1.  Albania ....................................................................................................................... 32 

3.3.2.  Bosnia and Herzegovina ............................................................................................ 33 

3.4. 

ENP countries ............................................................................................................ 35 

3.4.1.  Armenia...................................................................................................................... 35 

3.4.2.  Ukraine....................................................................................................................... 37 

3.5. 

Mediterranean partners............................................................................................... 39 

3.5.1.  Egypt .......................................................................................................................... 39 

3.5.2.  Lebanon...................................................................................................................... 40 

3.5.3.  Morocco ..................................................................................................................... 42 

3.5.4.  Syria ........................................................................................................................... 43 

3.5.5.  Tunisia........................................................................................................................ 45 

3.6. 

Other countries ........................................................................................................... 46 

3.6.1.  Brazil .......................................................................................................................... 46 

3.6.2.  South Africa ............................................................................................................... 47 

3.6.3.  Tajikistan.................................................................................................................... 49 

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  EU  budget  at  31 
December 2014. It provides further information on 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  EU  budget  under  each  programme  is  presented  in  section  2.  The  third  countries 
representing  important  risks  to  the  EU  budget  in  2014,  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. Data concerning EU loans 
are processed by the Commission whereas EIB (“the Bank”) figures have been provided by 
the Bank. 

The evaluated countries are grouped in 6 sub-sections: (3.1.) Member States, (3.2.) Candidate 
countries,  (3.3.)  Potential  candidate  countries,  (3.4.)  ENP  countries,  (3.5.)  Mediterranean 
partners and (3.6.) Other countries. 

4 

 
 
2. 

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 EU budget. The figures show the maximum 
possible  risk  for  the  EU  for  these  operations  and  must  not  be  read  as  meaning  that  these 
amounts will actually be drawn from the Guarantee Fund for external actions ("the Fund") or 
the EU budget. Accordingly, the relevant amounts are not registered as expenditure in the EU 
budget; rather they are formally recorded pro memoria only. 

TABLE A1:  CAPITAL OUTSTANDING AND BALANCES TO BE DISBURSED (in EUR million)

Authorised

ceiling (a)

Capital

Capital

Amounts signed 

outstanding at

outstanding at

(minus cancellation)

31.12.2013 (b)

31.12.2014 (b)

but not yet disbursed

at 31.12.2014 

Operations

MEMBER STATES

EIB (Member States) (1)

Euratom to Bulgaria and Romania (2)

BoP

Hungary

Latvia

Romania

EFSM

Ireland

Portugal

MEMBER STATES - TOTAL

THIRD COUNTRIES

Macro-Financial Assistance

Albania

Armenia

Bosnia and Herzegovina

fYRoM

Lebanon

Montenegro

Serbia

Tajikistan

Ukraine

Euratom to Ukraine (2)

EIB

EIB Pre-Accession countries 

EIB Neighbourhood and Partnership countries (3)

EIB Asia and Latin America

EIB South Africa

EIB Climate Change Mandate (2011-2013) (4)

THIRD COUNTRIES - TOTAL

4,000

6,500

3,100

7,000

22,500

26,000

69,100

9

65

140

90

50

7

473

75

1,610

4,000

37,842

43,927

11,764

2,852

2,000

100,905

2,657

357

3,500

2,900

5,000

21,700

22,100

58,214

9

65

128

44

25

6

284

4

0

29

10,003

9,237

2,692

769

217

23,512

2,315

324

1,500

1,900

5,000

22,500

24,300

57,840

9

65

124

34

0

5

232

0

1,360

24

10,322

10,048

2,761

827

474

26,283

83

0

0

2,000

0

0

2,083

0

0

0

0

0

0

0

0

250

300

3,613

8,832

1,834

301

1,455

16,585

18,667

GRAND TOTAL
(1) EIB lending to Member States prior to accession to EU was carried out under the mandate ceilings relating to Third Countries (below).

170,005

81,726

84,123

(2) The overall ceiling is EUR 4 000 million for loans to Member States and to certain non-member States. 

(3)  Loans subrogated to the EU following Syria defaults are included in this figure.

(4)  EIB Climate Change Mandate covers the above regions. 
(a)  Authorized ceiling: this is the aggregate of the maximum amounts of capital authorised (ceilings), or in the case of EIB: guarantee ceilings, as decided by the Council 

or by the European Parliament and the Council.

(b) Capital outstanding: this is the amount of capital still to be repaid on a given date in respect of operations disbursed.

5 

 
 
 
 
 
The graph hereunder shows the breakdown of outstanding amounts by financial instrument: 

The breakdown of each financing facility is detailed in the sections below.. 

6 

 
 
 
 
 
2.1. 

Loan operations covered by the EU budget guarantee  

The EU budget covers three types of operations. These are: 

2.1.1.  EU loan operations to Member States  

The outstanding risk of these operations is  covered by the EU Budget. They relate to BOP, 
EFSM and to borrowing and lending granted to certain Member States prior to their EU 
accession under MFA, Euratom (table A2a) and EIB guaranteed financing operations (table 
A3). 

Instrument

Decision

Date of

decision

Availability

period

Period 01.01.2014 - 31.12.2014
Loan situation

 - closed (a)

 - partially disbursed (b)

(for Request for Funds)

 - disbursed in full (c)

 - not yet disbursed (d)

Amounts

decided

Amounts

outstanding

at 01.01.2014

Operations 

made in 2014

Amounts

disbursed

Amounts

repaid

Amounts

outstanding

at 31.12.2014

TABLE A2a: BoP, EFSM and Euratom lending operations to Member States  (EUR million)

BOP

2002/332/EC (1)

18/02/2002

50,000.0

16,600.0

11,400.0

Hungary

Latvia

Romania

2009/102/EC

04/11/2008

closed (**)

2009/290/EC

20/01/2009

2009/459/EC

06/05/2009

closed 

closed

Precautionary BOP for Romania 

2013/531/EU

22/10/2013

Funds are available until 30/09/2015

EFSM

2010/407/EU
2011/77/EU 

11/05/2010

07/12/2010

EURATOM

2011/344/EU

17/05/2011

94/179/Euratom

77/270-271/Euratom

SEC(2000)661/2

29/03/1977

18/04/2000

C(2004)891

30/03/2004

closed

closed

closed

closed

Ireland

Portugal 

Bulgaria

Romania

TOTAL

(b)

(b)

(c)

(d)

(c)

(b)

(c)

(c)

6,500.0

3,100.0

5,000.0

2,000.0

3,500.0

2,900.0

5,000.0

60,000.0

48,500.0

22,500.0

43,800.0

21,700.0

26,000.0

22,100.0

4,000.0

436.0

212.5

223.5

356.9

143.4

213.5

0.0

0.0

0.0

0.0

3,000.0

800.0

2,200.0

0.0

0.0

0.0

3,000.0

2,000.0

1,000.0

0.0

0.0
0.0

0.0

32.6

22.6

10.0

8,400.0

1,500.0

1,900.0

5,000.0

46,800.0

22,500.0

24,300.0

324.3

120.8

203.5

65,536.0

55,556.9

3,000.0

3,032.6

55,524.3

** Means that no further request for disbursement are not possible (either because the total amount has been disbursed or because the facility has expired)
(1) Regulation establishing the facility stipulating that the outstanding amount of loans to be granted to Member States  shall be limited to EUR billion 50 in principal

7 

 
 
 
 
2.1.2.  EU loan operations to non-Member States 

These  operations  are  covered  by  the  Fund.  They  relate  to  MFA,  Euratom  (Table  A2b)  and 
EIB guaranteed lending operations to third countries or Member States before accession to the 
EU (table A3). 

TABLE A2b:  European Union (MFA) and Euratom loans to Third countries (EUR million) 

Period 01.01.2014 - 31.12.2014

Loan situation

   Country

Decision

Date

Availability

 - closed (a)

of decision

Period

 - partially disbursed (b)

(for Request 

 - disbursed in full (c)

for Funds)

 - not yet disbursed (d)

Amounts

decided

Amounts

Operations made in 2014

Amounts

outstanding

Amounts

Amounts

outstanding

at 31.12.2013

disbursed

repaid

at 31.12.2014

MFA

ALBANIA

ARMENIA

BOSNIA AND 

HERZEGOVINA 

FYROM

GEORGIA

JORDAN

KYRGYZ REPUBLIC

LEBANON

MONTENEGRO*

SERBIA *

TADJIKISTAN

2004/580/EC

29.04.04

closed

2009/890/EC

30.11.09

closed

99/325/EC

02/883/EC

2009/891/EC

10.05.99

09.11.02

30.11.09

closed

closed

closed

97/471/EC

99/733/EC

22.07.97

08.11.99

closed

closed

778/2013/EU

12.08.13

24/06/2017

1351/2013/EU

11.12.13

18/03/2016

1025/2013/EU

22.10.13

not yet fixed ***

2007/860/EC

21.12.07

closed

2001/549/EC*

2002/882/EC*

16.07.01

09.11.02

closed

closed

2001/549/EC*

2002/882/EC*

2009/892/EC

16.07.01

09.11.02

30.11.09

closed

closed

closed

2000/244/EC

20.03.00

closed

TUNISIA

534/2014/EU

15.05.14

not yet fixed ***

UKRAINE

EURATOM

2002/639/EC

2010/646/EC

2014/215/EU

12.07.02

closed

7.07.10

not yet fixed ***

14.04.14

closed

UKRAINE (Euratom)

94/179/EC

21.03.94

15.03.07

06.10.08

15.10.09

(c)

(c)

(c)
(c)

(c)

(c)

(c)

(d)

(d)

(d)

(b)

(c)

(c)

(c)

(b)

(b)

(d)

(c)

(b)

(c)

(c)

(c)

(c)

(c)

1,001,737.0

564.6

1,360.0

96.0

1,828.6

9.0

9.0

65.0

65.0

9.0

65.0

128.0

4.0

124.0

20.0

20.0

100.0

40.0

50.0

23.0

180.0

15.0

50.0

225.0

55.0

225.0

55.0

200.0

43.6

10.0

33.6

0.0

0.0

0.0

25.0

6.2

0.0

0.0

0.0

0.0

5.2

25.0

1.0

283.8

52.0

231.8

75.0

4.0

4.0

0.0

0.0

1,360.0

1,360.0

0.0

28.9

28.9

5.4

5.4

23.5

23.5

110.0

500.0

1,000,000.0

EUR equivalent ****

39.0 EUR

22.0 USD

10.3 USD

of USD 83 million

TOTAL

593.5

1360.0

101.4

1852.1

*

The decision refers to Serbia and Montenegro but 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 or have not entered into force
****

Including exchange rate valuation

8 

 
 
 
 
2.1.3.  Guarantees given to the EIB 

The  EU  provides  a  guarantee  in  respect  of  financing  granted  by  the  EIB  under  the  external 
mandates.  

The guarantee given to the EIB depends on the Mandate under which the loans are granted. 
The EU guarantee is limited as detailled below1: 

-  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; 

- the 65% guarantee rate covers three different mandates: 

• 
regarding the 2000/2007 Mandate, the EU budget guarantee is restricted to 65% of the 
aggregate amount of credits opened (i.e. loans signed and not cancelled) plus all related sums 
authorised by Council Decisions 1999/786/EC2 and 2008/580/EC (codified version)3; 

• 
for  the  last  two  Mandates  (2007-2013  and  2014-2020),  the  EU  budget  guarantee  is 
restricted to 65% of the aggregate amount of credits disbursed and guarantees provided under 
EIB  financing  operations,  less  amounts  reimbursed,  plus  all  related  amounts  authorised  by 
Decisions No 1080/2011/EU4and No 466/2014/ EU5. 

1 

2  
3  
4  

5  

Within each portfolio individual EIB loans are, de facto, guaranteed at 100% until the global ceiling is 
reached. 
OJ L 308, 3.12.1999, p. 35. 
OJ L 186, 15.7.2008, p. 30. 
Decision No 1080/2011/EU of the European Parliament and of the Council of 25 October 2011 granting 
an EU guarantee to the European Investment Bank against losses under loans and loan guarantees for 
projects outside the Union and repealing Decision No 633/2009/EC (OJ L 280, 27.10.2011, p. 1). 
Decision No 466/2014/EU of the European Parliament and of the Council of 16 April 2014 granting an 
EU  guarantee  to  the  European  Investment  Bank  against  losses  under  financing  operations  supporting 
investment projects outside the Union (OJ L135 of 8.5.2014, p.1). 

9 

 
 
 
                                                 
TABLE A3: EIB FINANCING OPERATIONS WITH EU GUARANTEE at 31.12.2014 (in EUR million)

Operations 

Authorised

Net signatures

Amounts

Outstanding 

ceiling

(a)

disbursed

capital

Mandate 2014/2020:

Pre-Accession countries

Neighbourhood and Partnership countries:

Mediterranean countries

Eastern Europe, Southern Caucasus and Russia

Asia and Latin America:

Latin America

Asia

Central Asia

South Africa

Mandate 2007/2013:

Pre-Accession countries

Neighbourhood and Partnership countries:

Mediterranean countries

Eastern Europe, Southern Caucasus and Russia

Asia and Latin America:

Latin America

Asia

South Africa

Climate change mandate

Mandate 2000/2007(3):

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.

27,000
8,739
14,437
9,606
4,831
3,407
2,289
936
182
416

29,484

9,048

13,548

9,700

3,848

3,952

2,912

1,040

936

2,000

20,060

10,235

6,520

2,480

825

2,095

200

390

1,090

300

45

70

-

29,026

9,121

9,325

3,930

2,543

1,219

936

1,953

18,717

6,712

5,896

2,105

817

3,187

76,544

49,839

477

1,587

809

375

3,235

6,482

590

4,478

1,980

7,047

29

315

710

285

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

98,386

8

8

-

-

-

-

-

-

15,842

6,215

4,869

1,273

1,917

460

635

473

17,906

6,205

5,674

2,105

817

3,105

33,756

477

1,587

809

375

3,235

6,482

590

4,478

1,980

7,047

29

315

710

285

8

8

-

-

-

-

-

-

14,984

5,941

4,669

1,180

1,771

421

528

474

10,046

4,208

3,516

510

255

1,557

25,038

156

207

38

43

674

1,118

16

190

6

213

0

278

21

0

78

377

26,746

3,982

5,320

68,688

3,982

5,320

52,606

(2)

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

(3)

 Including Turk ey Terra and Special Action Turk ey.

(a)  Net signatures equal amounts signed less cancellations

10 

 
 
                   
                          
                          
                      
                      
                      
                      
                      
                      
                   
                          
                          
                      
                      
                      
                        
                      
                      
                        
                      
                      
                      
                      
                      
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                      
                      
                      
                      
                      
                   
                      
                      
                 
                 
                 
                   
                   
                   
                   
                   
                   
                   
                   
                      
                      
                      
                      
                 
                 
                 
                 
                 
                 
 
 
ANNEX TO TABLE A3

COUNCIL DECISIONS GRANTING AN EU GUARANTEE TO THE EIB

Geographical Area/Mandate

Decision

of decision

of guarantee

Guarantee Agreement

decided

Date

Rate

Date of the 

Amount

MED. Financial protocols(1)
MED. Horizontal cooperation
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
Mandate 2007-2013
Climate change
Mandate 2014-2020 
TOTAL

1762/92/EEC

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)
2006/1016/EC(12) (13)
1080/2011/EU (13)
466/2014/EU (14)

08.03.77
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
19.12.06
13.10.11
16.04.14

75% (2)
75% (2)

30.10.78/10.11.78
09.11.92/18.11.92

100%
100%
100%
100%
100%
70%
100%
70%
70%
70%
65%
65%
100%
100%
65%
65%
65%

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
25.07.97/29.07.97
29.07.98/07.08.98
16.06.99/22.06.99
18.04.00/23.05.00
19.07.00/24.07.00 (11)
06.05.02/07.05.02
21.12.05/09.12.05
01.08.07/29.08.07 (14)
22.11.11
22.07.14

6,062
1,800
7,862
1,000
700
3,000
750
153
122
300
7,105
150
100
600
19,460
100
500
27,484
2,000
27,000
98,386

Including EUR 1,500 million for Spain, Greece and Portugal.

(1)
(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.

 Czech Republic and Slovak Republic, Bulgaria, Romania.

(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)
(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,  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.

(14)  The Decision establishes a fixed ceiling of  EUR 27 billion + an optional additional amount of EUR 3 billion to be decided and activated 

 in whole or in part following the mid-term review of the EIB Mandate.

2.2. 

Cumulative and annual EU budget guarantee exposures 

With the amortization profile based on the existing loans disbursed it is possible to calculate 
the total capital exposure of the EU budget and the total capital and interest payments due to 
be received each year. The following table A4 includes the estimated amount of principal and 
interest  due  each  financial  year  by  each  country  according  to  disbursements  made  until  31 
December 20146. Data related to Member States are highlighted in yellow in the next table. 

6 

For the purpose of this calculation, it is assumed that defaulting loans are not accelerated, i.e. only due 
payments are taken into account. 

11 

 
 
        
        
        
        
           
        
           
           
           
           
        
           
           
           
      
           
           
      
        
      
      
 
 
                                                 
Table A4: Total Annual Risk borne by the Budget in EUR million based on the amounts (capital and interest)

 due under all operations (ATOM, BOP, EFSM, MFA and EIB) disbursed at 31.12.2014

Ranking

Country

Total 
repayments due

2015

2016

2017

2018

2019

2020

2021

2022

2023-2050

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

Portugal
Ireland
Turkey
Romania
Morocco
Tunisia
Ukraine
Egypt
Latvia
Serbia
Hungary
South Africa
Bosnia and Herzegovina
Brazil
Bulgaria
Israel
Jordan
Panama
Lebanon
Syria
Croatia
Georgia
Albania
Argentina
Russia
Montenegro
India
Vietnam
Poland
Czech Republic
FYROM
Republic of Moldova
Armenia
Sri Lanka
Slovak Republic
Colombia
China
Laos
Mexico
Nicaragua
Peru
Indonesia
Gaza West Bank
Philippines
Paraguay
Honduras
Maldives
Lithuania
Pakistan
Ecuador
Uruguay
Azerbaijan
Slovenia
Grand Total
Total MS
Total non MS
Percentage MS

96.15

553.50 1,153.50
551.00 4,451.00
575.75
982.45

131.10
5.75
103.17
0.00
68.61
61.43
11.34
30.32
19.47
37.32
47.89
17.56
26.37
23.74
18.08
21.00
5.67
20.57
14.18
6.08
11.74
16.41
10.99
7.05
14.78
6.03
6.22
7.09

240.13
247.52
113.22
235.58
26.03
210.98
0.00
107.69
66.49
52.86
67.65
21.78
36.84
3.82
65.47
55.33
35.77
27.71
26.36
44.07
24.29
30.05
22.56
21.32
20.69
13.16
16.39
13.94
6.17
15.05
13.82
19.22
6.59
3.05
3.80
2.24
5.99
6.62
5.17
2.52

31,426.83
29,368.16 5,676.41
9,184.86
535.91
7,122.61 1,882.54
309.85
3,186.82
227.32
2,685.85
33.52
2,435.69
2,240.13
204.19
2,104.92 1,265.26
242.00
2,060.24
1,623.89
1,133.29
1,110.77
975.34
553.22
544.44
521.72
474.80
469.12
445.08
347.38
330.62
293.72
255.81
248.00
244.77
222.28
216.88
184.98
175.69
160.62
157.65
149.32
132.53
131.17
110.86
99.68
74.28
60.18
57.51
52.56
46.86
44.74
42.82
37.06
34.39
24.81
22.64
22.19
21.11
11.11
8.20
6.48

539.25
684.46 5,434.13
428.63
551.00
538.19
936.82
313.27 1,453.27 1,604.09 1,188.75
232.86
202.78
235.14
260.02
110.52
43.20
229.24
213.94
524.04
26.89
173.70
199.70
0.00
62.98 1,558.78
67.43
91.04
86.27
78.36
61.22
99.94
151.15
255.07
256.97
54.88
83.40
86.11
102.29
15.51
22.28
36.26
31.23
33.50
49.18
3.25
3.00
47.21
80.83
86.90
54.53
56.09
56.96
34.11
38.86
40.56
28.20
14.69
8.36
26.85
23.20
23.52
42.32
47.55
47.03
24.09
26.79
15.42
22.34
26.24
25.25
20.55
36.01
35.42
19.20
21.49
20.93
18.90
29.34
42.79
12.62
43.66
45.73
9.16
27.34
39.51
14.46
7.55
3.56
5.24
4.78
2.58
14.99
14.16
15.97
13.40
14.66
15.09
7.91
27.50
27.89
7.00
5.10
10.61
3.10
2.98
2.95
44.98
3.80
3.80
3.23
0.44
0.59
14.30
5.71
8.98
3.05
4.33
11.07
2.32
12.35
3.14
5.85
4.60
4.95
4.68
4.43
2.14
2.09

539.25 7,289.25 3,040.50 12,193.00
323.63 13,529.25
428.63 3,428.63
562.78 3,887.37
590.64
574.96
327.28
113.95
143.32
196.99 1,341.27
224.21
228.38
203.00
213.21
843.93
192.68
98.25 1,743.72
107.31
109.00
617.95
180.58
191.93
217.25
6.45
7.16
699.24
110.32
124.89
0.00
0.00
0.00
459.81
72.71
90.67
526.84
66.97
76.65
32.93
25.60
98.11
66.91
39.33
46.53
301.79
22.03
20.72
243.14
34.46
35.06
266.77
48.32
48.75
40.54
25.59
33.90
56.55
31.35
52.18
75.23
28.49
32.63
157.33
23.64
25.82
93.90
25.43
26.69
0.00
11.54
11.83
67.60
20.77
20.98
68.39
15.91
17.42
46.80
6.08
16.22
66.22
16.05
16.73
0.00
17.24
18.07
0.00
11.53
12.07
21.99
8.36
9.67
59.34
16.65
16.82
107.62
6.02
5.67
28.32
9.23
14.51
28.37
11.52
12.98
0.00
0.84
-
43.91
7.43
49.54
3.15
0.00
37.63
0.00
0.00
14.72
1.28
0.00
15.73
0.00
0.00
0.00
0.00
0.00
0.00
0.00
103,696.69 12,379.79 10,518.57 5,532.55 9,742.73 5,639.33 3,350.93 12,872.45 5,280.88 38,379.46
73,067.97 9,811.08 8,100.69 2,768.21 7,389.19 2,817.30 1,242.46 10,947.17 3,554.57 26,437.29
30,628.72 2,568.71 2,417.89 2,764.34 2,353.53 2,822.03 2,108.47 1,925.27 1,726.31 11,942.17
70.46% 79.25% 77.01% 50.04% 75.84% 49.96% 37.08% 85.04% 67.31% 68.88%

210.35
263.04
76.96
235.62
26.09
196.26
2.12
89.05
72.86
91.30
78.10
18.57
33.89
3.82
71.13
55.71
38.00
26.80
26.78
45.81
27.50
25.00
32.56
23.19
21.53
25.93
21.18
10.56
5.21
14.08
14.24
27.50
5.78
3.02
3.80
1.33
14.30
8.98
5.66
6.80
8.24
2.20
3.94
4.42
4.12
4.68
2.21
2.08

-
17.39
13.71
3.00
12.40
16.47
2.30
5.90
4.78
6.95
4.73
4.47

2.20
3.94
3.49
4.12
4.68

2.20
3.50
2.74
2.06
2.34

2.86
2.94
2.28

2.20
1.69
1.83

2.94
1.91

5.53
3.27

2.94
2.23

7.71
3.21

-
-
-
-
-
-
-

-
-
-
-
-

-
-
-
-
-

2.02

4.32

2.20

4.11

4.22

0.78

2.20

1.95

4.39

-
-

-
-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

12 

 
 
 
2.3. 

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 covered by the EU budget. In 
case  of  loans  to  Member  States,  the  risk  is  directly  covered  by  the  EU  budget.  Regarding 
loans to third countries, the risk is covered in the first instance by the Fund. 

The weight of EFSM (56% of the total oustanding) clearly highlights that most of the risk is 
nowadays directly borne by the EU budget, whereas before the financial crisis, EIB loans to 
non-Member States made up the highest exposure via the Fund. 

2.3.1.  EU loans operations to Member States  

In 2014, non-Member States represented 70.5% of the EU budget exposure (cumulated total 
risk  borne  by  the  EU  budget,  see  table  A2  of  the  SWD)  with  the  following  breakdown 
between the financial instruments:  

Graph A1:  Total  annual  risk  borne  by  the  EU  budget  (EUR  million)  at  31.12.2014  for  the 
period 2015-2022 (based on amortization plans of existing loans) 

As  Graph  1  illustrates,  the  main  risk  for  the  EU  budget  is  linked  to  EFSM  loans,  which 
represent 80% of the total outstanding of Member States. 

2.3.2.  EU loans operations to non-Member States 

In 2014, non-Member States represented 29.5% of the EU budget exposure (cumulated total 
risk  borne  by  the  EU  budget,  see  table  A2  of  the  SWD)  with  the  following  breakdown 
between the financial instruments:  

Graph  A2:  Total  annual  risk  borne  by  the  EU  budget  (EUR  million)  at  31.12.2014  for  the 
period 2015-2022 (based on amortization plans of existing loans) 

13 

 
 
 
As graph A2 illustrates that the weight of MFA and Euratom loans are marginal in the total 
annual risk in comparison with the EIB loans granted (these amounts include of loans signed 
and disbursed under all EIB mandates). 

2.3.3.  Guarantes given to the EIB 

98,5% of the 2007-2013 EIB external Mandate has been signed but an amount of EUR 13,262 
million still remains to be disbursed within 10 years from the end of the Mandate. 

Table A5a: EIB loan balances remaining to be disbursed under 2007 - 2013 financial framework (at 31.12.2014)

EUR million

A. Pre-Accession Countries
B. Neighbourhood and partnership countries
C. Asia and Latin America
D. South Africa
E. Climate Change Mandate (2011-2013)

Ceiling
(a)

Net signatures
(b)

Balances
to be disbursed ©

9,048
13,548
3,952
936
2,000
29,484

9,121
13,255
3,762
936
1,953
29,026

2,906
7,136
1,417
301
1,455
13,214

(a) During the last 6 months of implementation, EUR 100m was re-allocated from the Neighbourhood and Partnership countries to Pre-Accession.

(b) For the limited number of loan commitments signed in USD: conversion into EUR using the exchange rates at signature.

(c) For the limited number of loan commitments signed in USD: conversion of balance into EUR using exchange rate as at 31.12.2014.

The 2014-2020 Mandate covers EIB financing operations to be signed during the period from 
1 January 2014 to 31 December 2020. 

Table A5b: EIB loan balances remaining to be disbursed under 2014 - 2020 financial framework (at 31.12.2014)

EUR million

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

Ceiling

Net signatures
(b)

Balances
to be disbursed

8,739
14,437
3,407
416
27,000

200
1,480
415
0
2,095

200
1,474
418
0
2,092

(a) For the limited number of loan commitments  signed in USD: conversion into EUR using the exchange rates at signature.

(b) For the limited number of loan commitments  signed in USD: conversion of balance into EUR using exchange rate as at 31.12.2014.

14 

 
 
 
 
 
Risk factors 

Factors increasing the risk: 

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

•  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 are converted into EUR at the year end. 

Factors reducing the risk: 

•  the limitation of the guarantee given to the EIB; 

•  operations already repaid;  

•  the ceilings are not necessarily taken up in full; 

•  in some cases, notably private sector operations, the EU budget guarantee covers only well 
defined political risk events, with the EIB (or a third party guarantee) covering other risks 
(e.g. commercial). 

2.4. 

Payment under the EU 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  nuclear  sector 
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. 

2.4.1.  EU loan 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,  for  a  certain  period  or 
date, the available treasury funds of the Commission, the Commission would, in accordance 
with Article 12 of Council Regulation No 1150/20007, 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 

7 

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). 

15 

 
 
                                                 
in case of default. The same process is being applied for the EFSM loans with 14 days lead 
time. 

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

BOP and EFSM loans 

a) 

The Commission may need to propose a transfer or an Amending Budget to budget the 
cash advance under the corresponding budget line "01 02 02 European Union guarantee 
for Union borrowings for balance-of-payments support" or "01 02 03 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 EU budget. 

Euratom and MFA loans 

a) 

b) 

If the payment delay reaches three months after the due date, the Commission draws on 
the Fund to cover the default8 and to replenish its treasury. 

The Commission might also need to draw on the EU budget, most likely by means of a 
transfer, to provide the corresponding budget lines under articles "01 03 04  Guarantee 
for Euratom borrowings to improve the degre of efficiency and safety of nuclear power 
stations in third countries" or "01 04 03 Guarantee for Euratom borrowings" or "01 03 
03 European  Union Guarantee for Union borrowings  for  macro-financial assistance to 
third  countries"  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  State  and  the  transfers  are  likely  to  require  advance  authorisation  by  the 
budgetary authority.  

c) 

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

2.4.2.  Guarantees given to EIB 

The  EU  provides  a  guarantee  in  respect  of  financing  granted  by  the  EIB  under  the  external 
mandates. When the recipient of a guaranteed financing fails to make a payment on the due 
date, the EIB asks the Commission to pay via the Fund 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  Fund9  or  directly  from  the  EU  budget  should  the  resources  of  the  Fund  be 
insufficient10. 

8  

9 

Except  for  Bulgaria  and  Romania  which  were  granted  Euratom  loans  before  joining  the  Union.  The 
loans  (and  loans  guarantees)  to  accession  countries  were  covered  by  the  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 EU budget. 
Since  the  entry  into  force  of  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),  the  agreement  between  the  EU  and  the  EIB  on  the  management  of  the 

16 

 
 
                                                 
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. 

2.4.3.  Default interest penalties for late payment 

a) 

EU loans 

- For loans granted by the EU, default interest is owed by loan beneficiaries for the time 
between the date at which cash resources are made available by the EU 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 

Countries  benefitting  from  EU  loans  and/or  representing  important  risks  to  the  EU  budget, 
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 macroeconomic analyses  and  tables of risk 
indicators. The evaluated countries are grouped in 6 sub-sections: (3.1.) Member States, (3.2.) 
Candidate  countries,  (3.3.)  Potential  candidate  countries,  (3.4.)  ENP  countries,  (3.5.) 
Mediterranean partners and (3.6.) Other countries. 

Explanatory notes for country-risk indicators 

Abbreviations 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 
n.a.: not available 

10 

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 on the guarantee. 
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. 

17 

 
 
                                                                                                                                                         
Standard footnotes used in the table 

Includes  only  EU  and  EIB  loans  (outstanding  disbursements)  to  CEEC11,  NIS12  and 

1) 
MED13. 

2) 
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.  Member States 

3.1.1.  Bulgaria 

Economic growth has been subdued in Bulgaria in the post-crisis period. Real GDP growth is 
expected  to  have  reached  1.4%  in  2014,  compared  to  1.1%  in  2013.  Last  year  growth  was 
mainly  driven  by  private  consumption  and  government  investment,  while  net  exports  and 
private investment had a negative contribution. The current-account deficit has been broadly 
balanced  since  2010  and  posted  a  small  surplus  in  2014.  The  inflation  rate  has  remained 
negative since mid-2013. In 2014, this reflected a broad-based decline in import prices, weak 
domestic  demand  pressures,  and  lowered  administratively-set  prices  (mainly  for  energy, 
telecom and healthcare services). 

The  banking  sector  experienced  significant  turbulence  in  the  summer  of  2014,  when  two 
domestically-owned banks experienced bank runs spurred by rumours of their instability. One 
of  the  banks  was  put  under  special  administration  by  the  central  bank  for  a  period  of  five 
months and a review of the bank's assets and business practices was conducted. As a result, 
the  bank  was  found  to  have  negative  equity  and  its  licence  was  revoked.  The  other  bank 
received  liquidity  support  from  the  government,  approved  by  DG  COMP  under  state-aid 
rules. The support is scheduled to last until mid-2016. 

Public  finances  deteriorated  markedly  in  2014,  with  a  general-government  deficit  reaching 
3.4%  of  GDP,  compared  to  a  1.2%  deficit  in  2013.  Further  deficits  around  3%  of  GDP  per 
year are planned for 2015 and 2016. In addition, the government borrowed funds to support 
the  financial  sector,  including  the  liquidity  support  and  guaranteed  deposits  pay-outs.  As  a 
result, government gross debt is expected to increase from 18.3% of GDP in 2013 to 27% of 
GDP in 2014 and exceed 30% of GDP by the end of 2016. 

11 
12 
13 

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

18 

 
 
                                                 
Country-risk indicators : Bulgaria
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: Extended Fund Facility/Extended Credit Facility
Started June 2010 - completed June 2013
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)

3.1.2.  Hungary 

2012

2013

2014

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

(% of GDP)

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

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

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

0.5
12.3
3.0

-0.5

26,437
-0.7
1,142
15,553
7
1.96

3,580
8.7
NA
NA
NA

702.0
0.7
19.6
2.7

1.1
13.0
0.9

-1.2

28,071
2.2
1,275
14,426
6
1.96

3,412
8.3
NA
NA
NA

639.0
0.6
18.7
2.3

NA
NA
NA

NA
NA
NA

1.4
11.7
-1.0

-3.4

28,110
1.7
1,182
16,534
7
1.96

5,056
12.1
NA
NA
NA

553.0
0.5
10.9
2.0

NA
NA
NA

Baa2
BB+
BBB-

After a moderate growth of 1.5% in 2013, the Hungarian GDP grew by 3.6% in 2014. On the 
demand  side,  gross  fixed  capital  formation  grew  by  more  than  10%,  mainly  on  account  of 
public investment, boosted by EU fund absorption. Private investment was supported by the 
central  bank’s  Funding  for  Growth  Scheme  of  subsidised  loans  to  SMEs.  Household 
consumption continued to grow on the back of rising real incomes. With growth accelerating, 
employment reached 4.2 million in the last quarter of 2014, a level not seen since the early 
1990s.  However,  sizeable  employment  gains  were  due  to  the  extension  of  the  public  work 
scheme.  In  2014,  inflation  fell  to  a  historically low  rate  of  well  below  -0.2%,  as  a  result  of 
three successive waves of cuts in regulated energy and other utility prices in 2013-2014, the 
fall  in  oil  prices  as  well  as  historically  low  inflationary  pressures  from  the  euro  area.  The 
external balance of goods and services decreased to around 7% of GDP in 2014 from 7.6% in 
2013.  At  the  same  time  the  balance  of  primary  incomes  and  current  transfers  decreased  in 
absolute terms, so the current account remained broadly unstable at around 4% of GDP.  

The  still  high  Hungarian  government  debt  has  been  decreasing  since  the  beginning  of  the 
decade,  which  was  facilitated  by  a  sizeable  capital  transfer  from  the  takeover  of  mandatory 
second  pillar  pension  schemes  as  well  as  by  a  primary  surplus  maintained  since  2012. 
Compared  to  the  peak  level  of  81%  in  2011,  the  government  gross  debt-to-GDP  ratio  is 
forecast  to  reach  76%  by  2016.  In  the  medium  term  up  to  2025,  the  Commission's  baseline 
projection  indicates  a  steady  decline  of  government  debt  progressing  towards  the  threshold 

19 

 
 
 
value  mainly  due  to  the  projected  savings  in  age-related  expenditures.  Nevertheless, 
vulnerabilities remain with a relatively high sensitivity of the debt-reduction path to adverse 
macroeconomic shocks and exchange rate movements. 

Hungary faces declining but still substantial financial needs, which are expected to amount to 
around  20%  of  GDP  in  2015  and  2016.  Debt  financing  is  supported  by  favourable  market 
conditions.  The  sovereign  bond  market  proved  rather  resilient  in  recent  months  amid 
heightened  economic  and  geopolitical  risks  allowing  for  larger  issuances  at  historically  low 
yields. Financial buffers of the government stay at a comfortably high level, currently above 
7% of GDP. In addition, the high level of FX reserves (some EUR 35.1 billion)  of the central 
bank  provides  an  additional  safeguard  against  liquidity  shocks  and  other  funding  risks, 
covering around four and half months of imports. With the EUR 2 billion repayment of the 
second tranche of the EU balance of payments loan in early November, Hungary has already 
repaid  over  70%  of  the  originally  disbursed  amount,  and  the  country's  repayment  capacity 
remains sound. 

Country-risk indicators : Hungary
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

Status

Indicators of market's perception of creditworthiness

2012

2013

2014

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

(% of GDP)

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

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

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

-1.5
11.0
5.7

-2.3

86,423.9
1.7
-2,020.8
33881.3
5.0
291.3

97362.6
98.7
22.2
none
none

3,886.0
3.7
4.0
4.5

1.5
10.2
1.7

-2.4

89,197.0
4.2
-373.1
33782.5
4.7
296.9

89131.5
88.7
23.5
none
none

3,752.0
3.6
4.2
4.2

**
**

3.3
7.7
-0.2

-2.6

**

**

n.a.
4.1
n.a.
n.a.
n.a. ****

314.9

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

1,623.0
1.6
n.a.
n.a.

Stand-by arrangement, SDR 10.5 bn (amount drawn until September 
2009: SDR 7.6 bn)
Approved on 06/11/2008 - expired on 05/10/2010 
All outstanding obligations were repaid in August 2013 (ahead of 
schedule)

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

Ba1
BB 
BB+ (FX credit)  
BBB- (HUF 
credit)
Some numbers may differ from previous reporting due to the release of final data replacing preliminary estimates, 

Ba1
BB 
BB+ (FX credit)  
BBB- (HUF 
credit)

Fitch long-term foreign currency rating (end of period)

Ba1
BB 
BB (FX credit)  
BBB- (HUF 
credit)

changes in National Accounts and BOP standards

Source: Commission services' 2015 winter forecast 

* 

**

The figure was recalculated with the end-of-the-year official MNB exchange rate 

 ***
 **** Calculation based on Commission services' 2015 winter forecast for imports

*****  Excluding direct investment debt instruments

20 

 
 
 
3.1.3. 

Ireland 

After two years of near zero growth, real GDP grew by 4.9% y-o-y in the first three quarters 
of 2014, setting the ground for a strong expected annual growth rate of at least 4.7% in 2014. 
Growth has been driven by net exports and investment. Yet, some uncertainty underlies net 
export figures, which are driven to some extent by the production of goods abroad on behalf 
of  Irish  companies.  Household  spending  did  not  grow  significantly  in  real  terms  in  2014, 
although some of this sluggishness is due to statistical effects — employment figures, retail 
sales and tax receipts all point to a recovery in consumption that should become apparent in 
2015. Inflation remained lower than the euro-area average for the 6th consecutive year at 0.3% 
in 2014. Low energy prices pushed the HIPC index down to -0.3% y-o-y in December 2014. 
Unemployment  fell  steadily  throughout  2014  to  10.6%  in  December.  However,  long-term 
unemployment remained high at 46% of claimants at the end of the year.  

The  Irish  domestic  banks'  performance  continued  to  improve,  though  challenges  remain. 
Albeit declining gradually, non-performing loans remain high at about 25% of total loans in 
2014  and  private-sector  debt  at  278.3%  of  GDP  at  end  Q3-2014.  Two  of  the  three  main 
domestic banks turned profitable in 2014. The government recapitalised the three main Irish 
banks in 2011 and one restructuring plan is still being formulated and awaiting approval by 
the  European  Commission.  Bank  liquidity  and  funding  have  continued  to  improve  with 
expanding  market  access,  while  the  regulatory  and  supervisory  framework  has  been 
strengthened.  In  2014,  the  government  deficit  is  forecast  to  drop  to  around  4.0%  of  GDP, 
down  from  5.7%  in  2013.  This  reduction  reflects  the  effects  of  strong  economic  growth, 
windfall revenues and lower debt servicing costs. Tax revenues increased by 9.2% in 2014 but 
spending  pressures  vis-à-vis  the  budgeted  profile  intensified.  Unlike  in  previous  years, 
sizeable budget overruns in the health service were not offset by savings in other departments. 
In  structural  terms,  the  deficit  is  estimated  to  have  improved  by  0.9  pps.  to  3.9%  of  GDP. 
Gross government debt is projected to fall to 110.8% of GDP in 2014, down from 123.3 % in 
2013, mostly due to the liquidation of the Irish Banking Resolution Corporation. 

21 

 
 
Country-risk indicators : Ireland
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) (IFSC only)
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 

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)
Source: 2015 Winter Forecast, European Commission.

*

**

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

(% of GDP)

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

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

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

2012

2013

2014

-0.3
14.7
1.9

-8.0

90,900.0
1.6
-23,288.0
1,334.0
0.2
n/a

467,075.7
276.4
n/a
n/a
n/a

29,744.0
28.5
6.4
32.7

0.2
13.1
0.5

-5.7

86,100.0
4.4
-9,835.0
1,230.0
0.2
n/a

470,014.4
277.6
n/a
n/a
n/a

29,079.0
28.3
6.2
33.8

4.8%  *
11.1
0.3

-4.0  *

101,500.0
5.2
13,876.0  ***
n/a
n/a
n/a

356,045.7  ***
200.8  ***

n/a
n/a
n/a

29,368.0
28.3
8.2
28.9

Extended Fund Facility: XDR 19.5 billion drawn down
between 18 January 2011 and 18 December 2013
(XDR 7.65 billion repaid in December 2014 and
XDR 2.83 billion repaid in February 2015) (**)

Ba1
BBB+
BBB+

Baa3
BBB+
BBB+

Baa1
A
A-

These repayments discharge all scheduled IMF principal repayment obligations that were originally to fall due from July 2015 to June 2019. 

 Ireland plans to repay a total of XDR 15.7 of IMF loans in 2014 and 2015, subject to funding and market conditions. 

Subsequent repayments in 2015 will target loans falling due up to January 2021, subject to funding and market conditions.  

*** Q1-Q3 2014. Source: Central Statistical Office of Ireland (CSO).

3.1.4.  Latvia 

The  Latvian  economy  grew  by  2.4%  in  2014,  according  to  the  latest  estimate.  Following  a 
cumulative  GDP  contraction  of  about  20%  in  2008-2010,  the  country  experienced  a  steep 
recovery  afterwards  and  was  among  the  fastest growing  in  Europe  over  the  past  years.  The 
growth outlook also remains favourable despite the slowdown in 2014 and the risks related to 
the Russia-Ukraine conflict. The year-average inflation, as measured by the harmonised index 
of consumer prices (HICP), increased from 0% in 2013 to 0.7% in 2014 and is projected to 
reach 2.2% in 2016. The unemployment rate for the age group of 15-74 fell to below 11% in 
2014 from about 12 % in 2013. The rate is set to decline further to about 9% % in 2016.  

Sound fiscal performance over the past years have stabilised the general government debt at 
levels well below the benchmark of 60% of GDP. The country's adoption of the euro as of 1 
January 2014 is contributing to a further reduction in debt refinancing costs and the access to 
bond  markets  was  further  facilitated  by  a  series  of  rating  upgrades  in  2013  and  2014.  The 
general government debt stood at 40% of GDP in 2014 and is projected to decline to about 
37% of GDP in 2015 as a repayment of EUR 1.2 billion under the EU financial assistance was 
made on 16 January 2015. With this repayment, Latvia has repaid a total of EUR 2.2 billion 
or 75% of its liabilities to the European Commission and has successfully concluded the post-

22 

 
 
 
programme surveillance procedure. The general budget deficit expanded from 0.7% in 2013 
to 1.4% in 2014, due mostly to a one-off expenditure related to a guarantee enactment. 

Country-risk indicators : Latvia
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, fixed, Euro adopted as of 01.01.2014)

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

2012

2013

2014

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

(% of GDP)

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

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

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

4.8
13.9
1.6

-0.8

13,412.9
-3.3
713.5
5,684.1
5.1
1.42

30,253.9
137.2
n.a.
none
none

3,298.0
3.2
10.9
24.6

4.2
11.3
-0.4

-0.9

13,710.4
-2.3
370.3
5,783.2
5.1
1.42

30,501.2
131.6
n.a.
none
none

3,200.0
3.1
10.5
23.3

2.4
10.8
0.2

-1.5

13,856.6
-2.5
210.0
4,490.2
3.9
Euro

33,761.3
140.1
n.a.
none
none

2,103.0
2.0
6.2
15.2

Standby agreement
Started December 2008 - completed December 2012
Drawn amount of SDR 982mn is fully repaid

Baa1
Moody's long-term foreign currency rating (end of period)
A-
S&P long-term foreign currency rating (end of period)
Fitch long-term foreign currency rating (end of period)
A-
Some numbers may differ from previous reporting due to revisions made by national authorities (for 2011) or release of final data replacing 

Baa2
BBB+
BBB+

Baa3
BBB-
BBB-

*

3.1.5.  Portugal 

Portugal  has  experienced  a  modest  economic  recovery  since  spring  2013.  In  2014  the 
Portuguese  economy  is  estimated  to  have  grown  at  0.9%,  after  three  years  of  GDP 
contraction. The recent economic growth has been driven by accelerating private consumption 
and  investment,  while  the  weak  external  environment  exerts  a  drag  on  export  performance. 
Short-run economic indicators and low commodity prices suggest that the domestic demand 
recovery  should  continue  further.  In  2014,  the  labour  market  improved  faster  than  GDP; 
employment grew  by 1.6% y-o-y and unemployment declined to 14.1%. However, over  the 
medium  term,  the  progress  in  labour  market  developments  is  expected  to  become  more 
aligned with the economic expansion. HICP inflation fell to -0.2% in 2014, mostly due to the 
sharp decrease in energy prices, but it is expected to reach positive figures in the second half 
of 2015 as wages accelerate and oil prices stabilise. The adjustment of the external imbalances 
may  have  decelerated  in  2014  and  the  current  account  balance  is  projected  to  recover 
marginally,  mainly  due  to  the  outstanding  performance  in  the  tourism  sector  and 
improvements in terms of trade.  

Fiscal consolidation continued in 2014, while the accumulation of arrears has been halted and 
the  stock  of  arrears  reduced.  The  general  government  deficit  is  estimated  to  have  reached 
4.6% of GDP at the end of 2014, down from 4.9% of GDP in 2013. Risks to the projection 
relate to the cash-accrual adjustments and to the one-off operation related to Novo Banco. The 
gross debt-to-GDP ratio is forecast to increase from 128% in 2013 to about 129% of GDP in 

23 

 
 
 
2014.  The  downward  path  is  expected  to  materialise  in  2015,  supported  by  debt-reducing 
operations, the projected economic recovery and primary budget surpluses if fiscal discipline 
is maintained. 

The stabilisation of the financial sector has been preserved. Most banks, to reinforce market 
confidence, decreased their loans-to-deposits leverage and raised capital, notwithstanding the 
low  profitability  environment.  However,  some  financial  institutions  remain  fragile,  as  non-
performing loans have until recently risen and the deleveraging process in the private sector is 
still  on-going.  As  a  result,  credit  recovery  continues  facing  obstacles,  due  to  the  timid 
economic  growth  and  low  inflation  environment  which  also  weigh  on  domestic  banking 
sector profitability and firms' economic performance. 

Since  spring  2014,  Portugal  successfully  established  market  presence  with  several  medium- 
and long-term bond issuances. Regular auctions and syndications helped Portugal to meet its 
2014  funding  target  and  experienced  significant  market  demand  in  early  2015.  The 
Portuguese 10-year government bond remains at low yields at the beginning of 2015, around 
2.5%, and represents a reduction by 250 bps vis-à-vis the interest rate one-year-ago. 

Country-risk indicators : Portugal
Output and prices

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

Public finances

General government balance

Balance of payments (estimates for 2014)

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: Extended Fund Facility (EFF)
Started May 2011 - finalised in June 2014
Completed*****

2012

2013

2014

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

(% of GDP)

(mn EUR)
(% of GDP)
(bn EUR)
(bn EUR)
(months)
(per EUR)

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

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

-3.2
15.9
1.5

-6.4

63,400.0
-2.0
6.6
17.2
3.2
EUR

399,200.0
235.3
13.2
na
none

30,100.0
28.8
7.5
47.5

-1.4
16.5
0.2

-4.9

67,200.0
0.7
1.3
12.7
2.3
EUR

388,000.0
226.6
12.7
na
none

29,451.0
28.6
7.6
43.8

0.9
14.1
-0.4

-4.6

68,900.0
na
na
na
na
EUR

na
na
12.6
na
none

31,427.0
30.3
n.a.
45.6

EFF

EFF

EFF

On track

On track

Completed

Ba3
BB
BB+

Ba3
BB
BB+

Ba1
BB
BB+

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)
Quarterly National Accounts - Flash Estimate by the National Statistical Office. 

* 

Commission services' 2015 winter forecast.

GDP in national account terms was still negative in 2013 (-0.3% of GDP) and it is projected to only improve up to -0.2% of GDP in 2014.

** 
*** 
****  Debt service is defined as interests on public debt.
*****  EUR 26.9bn were disbursed by the EFF, the last tranche of about EUR 0.9bn was not disbursed after the Portuguese government decided 

to lapse the Programme.

Sources: Commission services, UNCTAD, Banco de Portugal, IMF, Moody's, S&P, Fitch. 

24 

 
 
 
3.1.6.  Romania 

The Romanian economy continued to register strong growth in 2014 with real GDP increasing 
by 2.9%. This follows a GDP expansion of 3.4% in 2013. In the Commission's 2015 winter 
forecast (2015WF), GDP is forecast to grow by 2.7% in 2015 and by 2.9% in 2016, driven by 
domestic demand and supported by a stable labour market and an expected gradual recovery 
in  the  global  outlook.  Private  consumption  is  projected  to  remain  strong  whereas,  after  two 
years  of  contraction,  investments  are  forecast  to  recover.  Annual  average  inflation  declined 
sharply from 3.2% in 2013 to 1.4% in 2014. It is forecast to remain moderate and reach an 
annual average of 1.2% in 2015 and of 2.5% in 2016. Unemployment was 6.8% at the end of 
2014  and  it  is  forecast  to  marginally  decrease  over  the  forecast  horizon  against  a  slowly 
declining working-age population. 

After a strong adjustment in 2013, the current account is expected to remain broadly stable at 
around 1% of GDP in 2014-16. Net exports' contribution to growth remained positive in 2014 
but it is expected to turn slightly negative in 2015 and 2016. Exports are forecast to continue 
increasing  in  2015  and  2016  thanks  to  the  expected  recovery  of  Romania’s  main  trading 
partners, but the pace of growth will be slower. Imports are expected to rise at a faster rate, 
propelled by the strengthening of domestic demand. The stable external position shall reduce 
Romania's vulnerability to potential financial market volatility affecting emerging economies. 

The  ESA  budget  deficit  in  Romania  is  estimated  to  have  been  reduced  to  1.8%  of  GDP  in 
2014, from 2.2% in 2013 (according to 2015WF). For 2015, the budget deficit is forecast at 
1.5% of GDP. For 2016, it is projected to remain around 1.5% of GDP, benefiting from the 
expected  acceleration  in  economic  activity  and  based  on  the  customary  no-policy-change 
assumption.  Government  debt  increased  from  30.5%  of  GDP  in  2010  to  38.0%  of  GDP  in 
2013.  It  is  projected  to  increase  slightly  to  around  39%  before  levelling  off.  Public  debt  is 
forecast to remain sustainable in the medium term. 

Financial  market  conditions  have  significantly  improved  throughout  2014  even  if  some 
volatility  was  noticeable  in  early  2014  amid  turmoil  in  emerging  markets,  in  particular 
Turkey.  The  government  bond  market  coped  relatively  well  with  geopolitical  tensions  and 
political  uncertainty  surrounding  Greece  sovereign  financing  conditions.  Indicators  of 
financing conditions such as CDS spreads or yields do not point to any major disruptions on 
the sovereign debt market. Recent auctions of government securities on the domestic market 
appear to have attracted more foreign investors. Sovereign refinancing conditions are likely to 
remain favourable this year as the effects of the FED's tapering might be outbalanced by the 
ECB's  liquidity  enhancing  measures.  The  government  is  further  optimising  its  debt 
management.  

A third consecutive, joint EU/IMF financial assistance programme, which the authorities treat 
as precautionary, was formally agreed in autumn 2013. In 2014 and 2015, EC and IMF staff 
paid four visits to Romania in the context of the programme. It was not possible to conclude 
any  review  of  the  EC  2013-15  Balance  of  Payment  programme  so  far.  While  progress  was 
achieved in various, including important areas, no agreement could be reached on several key 
points.  

25 

 
 
Country-risk indicators : Romania
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:
Status:
Type:
Date:
Status:
Type:
Date:
Status:

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

(% of GDP)

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

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

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

2012

2013

2014*

0.6
6.8
3.3

-3.0

50,184.7
-4.7
211,916.0
35,413.0
7.5
4.4

99,680.6
75.8
4.7
none
none

7,789.0
7.5
7.8
15.5

3.4
7.0
1.6

-2.2

56,670.8
-1.2
231,616.2
35,434.5
7.3
4.47

98,068.9
68.9
4.4
none
none

7,466.0
7.3
7.6
13.2

3.0
6.4
1.1

-1.8

60,188.0
-0.9
244,034.9
35,505.7
7.0
4.48

94,259.2
63.9
4.1
none
none

7,122.0
6.9
7.6
11.8

Stand-by arrangement
2009-2011
Drawn amount of SDR 10.6 bn, 5.2 bn to be repaid
Precautionary Standby arrangement
2011-2013
Available amount of SDR 3.1 bn not drawn
Precautionary Standby arrangement
2013-2015
On-going, available ammount of SDR 1.8 bn

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)

* Commission 2015 Winter Forecast
**  Debt service is based on the fiscal 

3.2. 

Candidate countries 

3.2.1.  Former Yugoslav Republic of Macedonia 

BAA3
BB+
BBB-

BAA3
BB+
BBB-

BAA3
BB+
BBB-

Growth picked up markedly in the first three quarters of 2014, averaging almost 4%, carried 
by  strong  investment  and  export  activity.  Household  consumption  growth  gathered  pace 
compared to the average of 2013, amounting to 3.1% y-o-y, stimulated by employment gains, 
a rise in real net wages and in pensions, and firming credit growth. The government delayed 
its fiscal consolidation strategy, and key reform measures on the expenditure side are yet to be 
laid  out.  The  general  government  is  likely  to  have  exceeded  the  revised  target  of  3.7%  of 
GDP,  by  some  0.4pp,  in  2014,  mainly  on  account  of  higher than  anticipated  rise in transfer 
payments  in  the  second  half  of  the  year.  General  government  debt  is  expected  to  have 
increased further in 2014, by over 3pp to some 38% of GDP, while public debt, taking into 
account  high  financing  needs  of  state-owned  enterprises,  in  particular  for  infrastructure 
projects,  stood  at  some  46%  of  GDP  at  end-November.  The  National  Bank  phased  out 
monetary relaxation against the background of firming domestic demand.  

26 

 
 
                  
                  
                  
 
External vulnerabilities remained contained in 2014. In the four quarters to September 2014, 
the  current  account  deficit  amounted  on  average  to  1.9%  of  GDP,  almost  unchanged  from 
full-year 2013 (1.8%). Private transfers continued to provide the main support to the current 
account.  In  the  first  ten  months,  they  were  some  4%  above  their  pre-year  level,  over-
compensating  the  deficit  in  the  goods  and  services  trade  balance.  Merchandise  exports  are 
estimated  to  have  grown  strongly  in  2014,  on  account  of  increased  production  by  foreign 
companies. Imports rose markedly, due to import-intensive investment in public infrastructure 
and  in  new  foreign  capacities.  Overall,  the  merchandise  trade  balance  deteriorated  slightly. 
Net  FDI  inflows  were  some  6.4%  below  their  pre-year  level  during  this  period.  At  end-
October, they stood at 2.3% of projected full-year GDP, compared to 2.6% one year earlier. 
Total gross external debt amounted to some 71% of GDP at the end of the third quarter, up 
from  68%  a  year  earlier,  mainly  on  account  of  a  500  mio  Eurobond  launched  by  the 
government in July, destined in large part to finance the repayment of 114 mio EUR in IMF 
loans and a 150 mio EUR Eurobond due in 2015. The level of external debt likely declined in 
the  fourth  quarter,  as  the  government  repaid  85  mio  EUR  in  IMF  loans.  Government 
borrowing abroad led to a renewed increase in foreign exchange reserves in the second half of 
the year, which, at end-2014, comfortably covered about 5 months of prospective imports.  

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

2012

2013

2014

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)

*

 Ratio of 12 months imports of goods moving average.

** 

flow up to and in including Q3.

f   Commission Autumn 2014 Forecast.
e  ECFIN estimation.

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

(% of GDP)

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

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

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

-0.4
31.0
3.3

-4.2

3,374.0
-2.9
117.3
2,193.3
6.1
61.53

5,171.7
68.2
n.a.
none
none

241.0
0.2
4.7
7.1

2.7
29.0
2.8

-3.9

3,552.1
-1.8
263.8
1,993.0
5.7
61.58

5,219.7
64.3
n.a.
none
none

194.0
0.2
3.7
5.5

3.9 f
28.5 f
0.7 f

-4.0f

3,007.0  Q3
-3.3 f
212.0 Q3

2,432.2

6.5 Q3

61.6

6,334.8

74.9 e
n.a.
none
none

160.0
0.2
2.5
5.3

PCL

none

none

On-track

none

(post-program 
monitoring)

(post-program 
monitoring)

none
BB-
BB+

none
BB-
BB+

27 

 
 
 
3.2.2.  Montenegro 

The  country  recorded  a  mild  recovery  in  2014,  reflecting  failing  industrial  production  and 
exports. In 2014, the year-average consumer price index contracted by 0.7%, driven by falling 
prices  of  food,  communications  and  transport.  The  labour  market  recorded  some  marginal 
improvement  in  the  third  quarter  of  2014,  with  the  unemployment  rate  falling  to  16.4% 
compared  to  17.6%  a  year  earlier,  while  the  employment  rate  increased  by  2.6  percentage 
points  over  the  year.  In  the  four  quarters  to  September  2014,  the  current  account  deficit 
broadened to 15.5% of GDP, as merchandise exports declined substantially over the year and 
imports remained practically flat. The external deficit is being financed by FDI inflows which, 
together with other investments, fully covered the current account gap. No reliable statistics 
exist  on  international  investment  position,  making  it  difficult  to  assess  the  country's  net 
external debt. Yet, a cutback in capital inflows (notably on greenfield investments) remains a 
major  risk  as  it  would  depress  domestic  demand  and  weaken  fiscal  performance  given  the 
reliance  of  public  finances  on  indirect  tax  revenue  from  imports.  In  2014,  the  central 
government  budget  deficit  totalled  3%  of  GDP,  compared  to  5.3%  gap  a  year  earlier.  Total 
budget  revenue  grew  8.6%  y-o-y  boosted  by  higher  revenue  from  taxes  and  social 
contributions, while budget expenditures rose much more moderately (by 0.6% y-o-y). Public 
debt stood at 57.8% of GDP in November 2014 of which, public external debt accounted for 
46.3%  of  GDP.  On  14  November  2014,  Standard  &  Poor's  cut  Montenegro's  rating  to  B+ 
from BB- while maintaining the outlook stable on deteriorating fiscal metrics resulting from 
the imminent construction of a highway On 2nd December, Moody's changed the outlook on 
government  bonds  from  stable  to  negative  but  affirmed  the  rating  at  Ba3,  reflecting  the 
country's high revenue generation capacity and favourable average funding costs supporting 
debt affordability. 

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 : 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

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)

*

**

f

Ratio of 12 months imports of goods moving average.

flow up to and in including Q3.

Commission Winter 2015 Forecast.

3.2.3. 

Serbia 

2012

2013

2014

-2.5
19.7
4.1

-5.6

1,389.4
-18.7
461.6
347.9
2.3
1.00

3,603.2
108.4
4.3
none
none

204.0
0.2
5.7
14.7

3.3
19.5
2.2

-5.3

1,390.1
-14.6
323.9
423.7
2.9
1.00

2,936.5
113.3
5.1
none
none

218.0
0.2
7.4
15.7

1.4
19.3 f
-0.3

-3.0 f

1353.9 f
-14.2
256.4 Q3
544.9 Q3
3.7 Q3

1.00

3,854.7
113.6
5.5
none
none

244.0
0.2
6.3
18.0

none

none

none

Ba3
BB-
none

Ba3
BB-
none

Ba3
B+
none

Impacted  by  heavy  floods  in  the  spring  and  weaker  external  environment,  the  economy  is 
estimated  to  have  contracted  by  2%  in  2014.  Domestic  demand,  which  had  already  been  a 
drag  on  growth,  weakened  further  with  all  components  registering  negative  growth  rates  in 
the third quarter. External imbalances deteriorated slightly and the current account deficit is 
estimated  to  have  risen  to  around  6%  of  GDP.  Price  stability  has  been  a  remarkable 
achievement,  as  inflation  remained  on  average  at  close  to  2%  in  2014.  The  National  Bank 
reacted  to  the  low  inflationary  environment,  to  first  steps  at  fiscal  consolidation  and  to  the 
anticipated  agreement  with  the  IMF  by  cutting  its  key  policy  rate  to  8%  in  November.  In 
2014,  although  budget  execution  was  better  than  planned,  the  consolidated  deficit  has  still 
turned  out  very  high  at  an  estimated  4.5%  of  GDP.  While  there  is  still  no  clarity  on  the 
medium-term  fiscal  strategy,  the  recently  adopted  set  of  consolidated  measures,  including  a 
cut  in  pensions  and  government  wages  and  the  announced  steps  to  restructure  state-owned 
enterprises  and  reduce  state  exposure  to  them,  have  send  a  strong  signal  about  government 
intentions  to  rein  in  fiscal  imbalances.  Government  debt  continued  to  increase  in  2014, 
reaching close to 70% of GDP. 

The  dinar  had  remained  broadly  stable  against  the  euro  until  late  July,  supported  by  central 
bank interventions, before coming again under depreciating pressures in the last few months 
of the year and losing some 5.5% y-o-y of its value against the euro. The foreign exchange 
reserves of the central bank fell to EUR 9.9 billion by the end of the year, covering over six 

29 

 
 
 
months’ worth of imports of goods and services. In November, the authorities reached a staff-
level  agreement  on  an  economic  program  that  could  be  supported  by  a  36-month 
precautionary Stand-By Arrangement with the IMF. The agreement is scheduled for approval 
by the IMF Executive Board in the second half of February 2015. There were no changes in 
Serbia's sovereign rating in 2014. 

(%)
(% 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)

* Ratio of 12 months imports of goods moving average.

f - Commission Autumn 2014 Forecast.

e - ECFIN estimation.

3.2.4.  Turkey 

2012

2013

2014

-1.0
23.9
12.2

-6.1

11,482.8
-11.5
690.6
10,914.7
9.3
113.01

25,645.0
80.9
34.3
none
none

2,102.0
2.0
8.2
18.3

2.6
22.1
2.2

-4.7

13,972.0
-6.1
1,256.5
11,188.8
9.1
113.09

25,788.0
75.3
N.A.
none
none

2,174.0
2.1
8.4
15.6

-2.0 e
20.2 f
1.7

 -4.5 f

13,244.7

 -6.3 f
1 010.6  Q3
10 270.5 Nov
8.8 Q3

117.25

 26.400 f
 79.8 f
N.A.
none
none

2,060.0
2.0
7,803.0
15.6

none

none

none

none
BB-
BB-

B1
BB-
B+

B1
BB-
B+

Following  a  strong  start,  the  Turkish  economy  slowed  down  significantly  in  the  course  of 
2014. GDP growth declined from 4.8 % year-on-year in the first quarter to 1.7 % in the third 
quarter. Consumer spending softened in response to higher interest rates and macro-prudential 
measures to rein in household borrowing. Business investment contracted in the first half of 
the year and was still flat in the third quarter. Sluggish domestic demand was partly offset by 
improving  net  exports.  Apart  from  monetary  tightening,  net  exports  benefitted  from  a  more 
competitive exchange rate in the early part of the year and from sharply lower imports of non-
monetary gold. Employment continued to expand strongly in 2014, but the labour force grew 
even faster, resulting in rising unemployment. 

Inflationary  pressures  were  fuelled  by  a  lower  exchange  value  of  the  Turkish  lira  and  by  a 
drought-related  surge  in  food  prices,  particularly  in  the  first  half  of  2014.    End-of-year 
inflation increased by 0.8 percentage points to 8.2 %, which was above the central bank's 5 % 

30 

 
 
 
target  for  the  fourth  consecutive  year.  In  January  2014,  the  central  bank  had  tightened 
monetary policy significantly in the context of a broad  sell-off of Turkish bonds and stocks 
and strong depreciation pressure against the lira. When the lira had recovered in the foreign 
exchange  markets,  the  central  bank  lowered  its  key  interest  rate  (the  one-week  repo  rate) 
gradually from 10 % to 8.25 % in mid-2014. After a six-month pause, monetary policy easing 
was  resumed  in  January  2015  with  a  50  basis-point  cut  in  the  key  policy  rate.  The  current 
account deficit narrowed to EUR 34.5 billion in 2014, corresponding to an estimated 5.8 % of 
GDP.  Export  revenues  (goods  and  services)  increased  by  5.4 %  while  much  reduced  gold 
imports lowered the overall import bill by 2.8 %. The central government recorded a budget 
deficit  of  1.3 %  in  2014,  up  by  0.1  percentage  point  from  the  preceding  year.  General 
government debt as a ratio of GDP has declined from 46 % in 2009 to around 34 % at the end 
of 2014. 

Country-risk indicators : Turkey
Output and prices

Real GDP growth rate (1)
Unemployment (2)
Inflation rate (CPI) (Dec/Dec)

Public finances

General government balance (3)

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) (4)

In months of subsequent year's imports

Exchange rate (end of period)

External debt

External debt (end of period) (5)
External debt/GDP (5)
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

2012

2013

2014

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

(% of GDP)

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

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

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

2.1
8.4
6.2

-0.3

159,555
-6.2
7,137
104,208
6.2
2.36

256,966
42.9
n.a.
none
none

9,125
8.7
3.6
5.7

4.1
9.0
7.4

-1.6

158,163
-7.9
6,867
107,216
6.8
2.96

282,460
47.3
n.a.
none
none

9,253
9.0
3.3
5.9

2.8
9.8
8.2

-1.5

166,694
5.8
4,127
118,643
n.a.
2.83

315,346
50.2
n.a.
none
none

9,185
8.9
2.9
5.5

none

none

none

Ba1 /positive
BB /stable
BBB- /stable

Baa3 /stable Baa3 /negative
BB+/stable BB+/negative
BBB- /stable

BBB- /stable

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) 2014 figure based on 3 quarters

(2)  Labour force 15 years and older, 2014 figure based on January - October

(3)   General government balance for 2013 and 2014 from DG ECFIN Winter 2015 Forecast

(4)  Gross International reserves, 2014 figure as of 30 November 2014

(5)  2014 figure as of 30 September

31 

 
 
 
3.3. 

Potential candidate countries  

3.3.1.  Albania 

Economic growth  was still subdued  in the first three quarters of 2014 at an estimated 1.4% 
year-on-year, but indirect indicators point to a firming of private consumption and investment. 
The  clearance  of  a  large  portion  of  government  arrears  in  2014  improved  private  sector 
liquidity and confidence. The still negative output gap and the absence of supply-side shocks 
exerted  little  pressure  on  prices,  leading  to  a  deceleration  of  inflation  to  1.6%  in  2014,  i.e. 
below the lower band of Bank of Albania (BoA)'s target range of 2%-4%. This created room 
for further monetary policy easing, with BoA lowering the key interest rate in several steps to 
an historic low of 2.25% in November 2014. Following twelve consecutive months of decline, 
lending has been on an upward trend since July 2014, but the continuing very high level of 
non-performing 
third  quarter  of  2014),  highlights  remaining 
vulnerabilities in the banking sector, which is otherwise well capitalised and liquid.    

loans  (24.9% 

the 

in 

The current account deficit widened by almost 30% year-on-year in the first three quarters of 
2014  as  a  pick-up  in  imports,  driven  by  strengthening  domestic  demand,  outweighed  the 
continued  increase  in  exports.  The  primary  income  balance  also  worsened  due  to  increased 
repatriation of investment income. On the other hand, remittances inflows stopped their long-
standing decline. Overall, the current account deficit in the four quarters to September 2014 
rose to 12.4% of GDP from 9.3% in the corresponding period a year earlier. Net FDI inflows 
in  January  to  September  2014  decreased  by  24%  from  the  previous  year  (partly  reflecting 
privatisation-related  base  effects)  and  financed  58%  of  the  current  account  deficit  in  this 
period. On the financing side, Albania can also draw on resources made available to it under a 
three-year  EUR  330  million  IMF  loan  approved  in  February  2014.  Following  an  annual 
increase  of  2.2 %,  foreign  reserves  stood  at  €2.1  billion  in  September  2014,  covering  4.7 
months  of  imports.  The  stock  of  gross  external  debt  increased  by  9.8 %  year-on-year  and 
stood at 65 % of projected full-year GDP in September. Long-term debt increased most and 
continues to make up more than 80 % of the total.  

The 2014 budget outcome, at 5.1% of estimated full-year GDP, undershot the target of 6.3% 
that  had  already  been  revised  downwards  in  September  from  the  initial  estimate  of  6.6%. 
Reflecting rate hikes as well as efforts to improve tax collection, revenues increased by 12.1% 
year-on-year,  broadly  in  line  with  the  revised  plan.  However,  it  was  the  shortfall  of 
expenditure  (in  particular  operating  expenses  and  investment  spending)  that  kept  the  deficit 
below target. The 2015 budget raised excise and fuel taxes as well as the tax levied on capital 
income.  This,  coupled  with  an  expected  continuation  of  efficiency  gains  in  tax  collection, 
should  create  space  for  the  continuation  of  arrears  clearance,  while  starting  to  lower  public 
debt which reached an estimated 71.3% of GDP in 2014. 

32 

 
 
(%)
(% 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 : 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 *

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)

flow up to and in including Q3.

*  Ratio of 12 months imports of goods moving average.
** 
e ECFIN estimation.
f  Commission Winter 2015 Forecast.

3.3.2.  Bosnia and Herzegovina 

2012

2013

2014

1.6
13.8
2.0

-3.4

3,180.7
-10.2
727.2
1,907.7
6.5
139.04

5,512.7
57.4
9.4
none
none

287.0
0.3
5.2
9.0

1.4
16.4
1.9

-4.8

3,412.1
-10.6
923.2
1,955.7
6.8
140.26

6,177.4
63.6
n.a.
none
none

301.0
0.3
4.9
8.8

1.7 f
17.5 f
1.6

-5.1

2,676.0 Q3
-12.8 f
526.0 Q3
2 063.4 Nov
n.a.
140.10

6,618.1 Q3
65.4 e
n.a.
none
none

294.0
0.3
4.4
11.0

none

none

B1
B+
none

B1
B
none

EFF
28/02/2014
on track

B1
B
none

Even  though  the  economic  revival  started  in  2013  came  abruptly  to  a  halt  in  the  second 
quarter of 2014 mainly as a result of the heavy spring floods, GDP growth in the first three 
quarters of 2014 remained in positive territory and stood at 1.1% year-on-year. In contrast to 
2013  when  the  strong  contribution  of  net  exports  was  the  main  driver  of  economic  growth, 
indicators for the first three quarters of 2014 point to a firming of private consumption despite 
a persistently high registered unemployment rate staying at 43.7% in the third quarter of 2014. 
However, on a positive note, the first eleven months of 2014 were featured by a strengthening 
credit  activity  in  the  household  sector  (5.7%  year-on-year),  which  was  however  partly 
balanced off by a stagnating lending to the  private non-financial corporate sector (1% year-
on-year) with the growth of the latter turning even negative in November 2014. At the same 
time,  the  rising  level  of  non-performing  loans  (16.1%  of  total  loans  in  the  third  quarter  of 
2014)  highlight  remaining  vulnerabilities  in  the  banking  sector,  which  is  otherwise  well-
capitalised and liquid. The deflationary trend that started in August 2013 came eventually to a 
halt in October-November 2014 partly due to the one-off increase of the excise tax on tobacco 
as  of  August.  Thus,  annual  CPI  in  November  stood  at  0%  bringing  the  12-month  moving 
average inflation rate slightly up to -1%. 

33 

 
 
 
Following a substantial narrowing of the current account deficit in 2013, external imbalances 
started  to  widen  again  through  January-September  2014  as  a  pick-up  of  imports  could  only 
partly  be  balanced  off  by  the  minor  increase  in  exports.  Accordingly,  the  current  account 
deficit deteriorated markedly to 7.7% of GDP in the four quarters to September 2014 up from 
5.9% of GDP in 2013. As of financing, net FDI inflows continued their downward trend to 
reach  2%  of  GDP  in  the  third  quarter  of  2014  and  covering  thus  only  slightly  less  than  a 
quarter  of  the  current  account  deficit.  Boosted  by  government  borrowing,  foreign  exchange 
reserves  increased  by  11.2%  on  annual  basis  and  stood  at  €3.9  billion  in  November  2014, 
covering 5.8 months of imports.  

The heavy spring floods caused revisions of the budgets of the two entities and the Institutions 
of  Bosnia  and  Herzegovina  in  2014  with  a  view  to  providing  emergency  financing  for  the 
flooded areas. Accordingly, the fiscal deficit is expected to have increased to 4.5% of GDP in 
2014, up from 0.8% of GDP as originally foreseen in the Global framework of fiscal balance 
and  policies  2014-2016.  On  a  positive  note,  however,  preliminary  data  for  the  first  three 
quarters  of  2014  point  towards  a  stronger-than-expected  growth  of  revenues  (4%  year-on-
year), mainly on the back of rising revenues from indirect taxes. This was, however, still in 
parallel  with  an  equal  rise  of  current  spending  (e.g.  on  social  contributions  and  wages). 
Consequently, public foreign debt increased to 30.2% of GDP in September 2014, compared 
to  28.4%  of  GDP  in  2013.  Although  the  Stand-By  Arrangement  with  the  IMF  remains  on 
track, the eighth review could not be concluded in December 2014 and the disbursement of a 
tranche in the amount of approximately BAM 130 million has been postponed again as agreed 
measures to rein in public spending not related to the spring floods and to strengthen financial 
sector stability and banking supervision were not adopted on time. 

34 

 
 
Country-risk indicators : Bosnia and Herzegovina
Output and prices

2012

2013

2014

(%)
(% 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)

*  Ratio of 12 months imports of goods moving average.

** 

flow up to and in including Q3.

3.4. 

ENP countries  

3.4.1.  Armenia 

-1.2
45.9
2.0

-2.0

3,949.7
-9.2
259.8
3,327.8
5.1
1.96

8,214.4
62.6
12.6
none
none

874.0
0.8
10.6
22.1

2.5
44.5
-0.1

-2.2

4,187.6
-5.9
224.2
3,614.0
5.6
1.96

8,327.1
62.1
13.7
none
none

1,025.0
1.0
12.3
24.5

0.6
43.7
-0.5

0.5

3,356.4
-7.7
340.3
3 941.8
5.8
1.96

n.a.
n.a.
14.8
none
none

1,111.0
1.1
n.a.
33.1

SBA
41178
on-track

B3
B
none

SBA
26-Sep-12
on-track

SBA
26-Sep-12
on-track

B3
B
none

B3
B
none

Economic  growth  slowed  down  from  3.5%  in  2013  to  2.6%  in  2014.  This  was  mainly  the 
result  of  the  economic  slowdown  in  Russia  which  led  to  a  decline  in  exports  and  foreign 
inflows  for  Armenia.  Average  inflation  receded  from  5.8%  in  2013  to  2.2%  in  2014,  as  a 
result  of  the  lower  gas  prices  from  Russia.  Fiscal  discipline  was  maintained  thanks  to 
expenditure  restraint  and  to  increased  revenue  collection.  Despite  the  slowdown  of  the 
economy, the fiscal deficit is estimated to have widened to 2.3% of GDP in 2014 from 1% of 
GDP in 2013. The economy benefitted as well from the gas deal that Armenia reached with 
Russia at the end of 2013 saving around 1.5% of GDP in import cost. 

External  public  debt  was  estimated  at  43.7%  of  GDP  (with  the  total  public  debt  at  49%  of 
GDP)  at  the  end  of  2014,  a  16.2%  increase  from  year-end  2013  due  to  the  currency 
depreciation in late 2014. The total external debt to GDP ratio increased to 93.7% of GDP at 
year-end 2014 from 82% one year before.  

The  consolidation  of  the  current  account  did  not  advance  in  2014.  The  current  account 
recorded an estimated 8.1% of GDP deficit in 2014 (from 8% in 2013 and 10.6% in 2012) as 
a result of a decline in exports (notably to Russia) and remittances in the second half of 2014.  
FDI  continued  to  weaken:  it  is  estimated  to  have  reached  around  USD  360  million  in  2014 

35 

 
 
 
shrinking by 28% compared to 2013. In this context, the Armenian Dram lost around 18% of 
its value against the USD in Q4 2014. This had a negative impact on Armenia's credit profile 
as  Moody's  and  Fitch  downgraded  Armenia's  default  ratings  to  Ba3  and  B+  respectively. 
Foreign reserves declined significantly as the Central Bank of Armenia intervened to smooth 
FX  market  conditions.  The  level  of  foreign  reserves  stood  at  around  USD  1,573  million  at 
year-end 2014, which is estimated to be equivalent to 4.1 months of next year's imports (from 
5.4 months in 2013).   

Armenia's  financial  sector  remains  well  capitalised  but  relatively  under-developed.  Non-
performing loans have increased as a result of the economic slowdown. Provisions for NPLs 
have  had  to  be  increased  in  response  to  the  economic  slowdown.  The  authorities  aim  at 
aligning  the  regulatory  and  supervisory  framework  with  Basel  III  guidance  as  well  as 
strengthening de-dollarisation policies.  

On 22 of December 2014, the IMF Executive Board approved the first review of Armenia’s 
IMF programme. 

36 

 
 
2012

2013

2014**

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 

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

(% of GDP)

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

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

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

7.1
19.0
3.2

-1.5

1,980.9
-11.1
366.9
1,395.3
4.4
497.7

5,783.0
74.9
22.1
none
none

104.0
0.1
1.8
5.3

3.5
18.5
5.6

-1.0

1,996.5
-8.0
370.2
1,645.2
5.4
554.7

6,244.3
82.0
42
none
none

122.0
0.1
2.0
6.1

Type: Extended Fund Facility (EFF)

EFF/ECF

EFF/ECF

Started February 2014

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)

Started June 
2010 - 
completed 
June 2013
On track

Started June 
2010 - 
completed 
June 2013
On track

Ba2
none
BB-

Ba2
none
BB-

*

IMF First Programme Review
**  Numbers for 2014 are estimates
Sources: Central Bank of Armenia, National Statistical Service of Armenia, Commission, IMF, Moody's, Fitch

2.6
18.0
2.9

-2.3

2,365.5
-8.1
293.0
1,276.9
4.1
565.1

7,175.9
93.8
24
none
none

149.0
0.1
2.1
6.3

EFF
Started in 
February 
2014, 38-
months 
duration
On track

Ba3
none
B+

3.4.2.  Ukraine 

Following two years of stagnation, Ukraine’s economy entered a deep recession in 2014 due 
to  a  confidence  crisis  as  a  result  of  a  major  separatist  conflict  in  the  eastern  part  of  the 
country.  This  crisis  was  reflected  in  a  sharp  currency  depreciation,  as  well  as  lower 
investment and consumption activity. The loss of productive capacity in the East, Ukraine’s 
industrial hub, further contributed to the contraction of GDP by an estimated 7.1% in 2014. 
The  weaker  currency,  coupled  with  significant  increases  in  administered  prices,  resulted  in 
acceleration  of  CPI  inflation  to  24.9%  year-on-year  in  December  2014.  Despite  the 
introduction  of  various  corrective  measures  (on  both  the  revenue  and  expenditure  side),  the 
fiscal position of the country worsened as the overall fiscal deficit, including the deficit of the 
state-owned gas monopoly Naftogaz, rose to an estimated 10% of GDP in 2014 from 6.7% a 

37 

 
 
 
year earlier. This high deficit, coupled with the currency depreciation and funds allocated in 
support of the banking sector, led to a strong worsening of public debt metrics with the debt-
to-GDP  figure  reaching  an  estimated  72.4%  of  GDP  at  the  end  of  2014  from  40.3%  a  year 
earlier. 

On the external front, an adjustment of the current account deficit (to 4.0% of GDP from 8.7% 
in  2013)  driven  by  reduced  imports  was  accompanied  by  sizeable  private-sector  financial 
outflows and payments for gas arrears. As a result, Ukraine’s gross international reserves fell 
by  nearly  60%  (EUR  10  billion)  in  2014  to  only  EUR  6.2  billion  at  the  end  of  the  year,  or 
only  1.4  months  of  next  year’s  imports.  The  drop  of  reserves  took  place  despite  official 
support of close to EUR 7 billion that Ukraine received in the year as part of the international 
support  programme  for  the  country  that  was  led  by  the  IMF.  Out  of  this,  the  EU  disbursed 
EUR 1.36 billion in loans to Ukraine under two macro-financial assistance programmes and 
provided EUR 250 million in budget support grants for institution building. 

The  confidence-driven  recession  and  currency  depreciation  have  acted  as  a  drag  on  the 
banking sector. Bank deposits, adjusted for foreign exchange effects, fell by nearly a quarter 
in 2014, driven by a 31% drop of household savings despite various  controls introduced  by 
the  central  bank  to  limit  the  outflow.  Weak  economic  activity  and  significant  capitalisation 
needs faced by commercial banks translated into a 16% fall in the stock of credits in the year. 
The banking sector finished 2014 with a loss of UAH 53 billion, which resulted in a negative 
return  on  assets  of  4.1%.  The  share  of  non-performing  loans  has  been  gradually  increasing, 
reaching 19% at the end of 2014. In an attempt to stabilise the banking sector, the National 
Bank  of  Ukraine  (NBU)  started  a  clean-up  of  unviable  banks  by  introducing  temporary 
administration  in  a  number  of  lenders,  while  simultaneously  improving  the  operational  and 
financial capacity of the Deposit Guarantee Fund. Based on the results of stress tests that were 
carried  out  for  the  major  35  commercial  banks  in  2014,  the  NBU  also  launched  a 
comprehensive recapitalisation exercise for the sector. 

38 

 
 
Country-risk indicators : Ukraine
Output and prices

Real GDP growth rate*
Unemployment
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)
(%)
(%)

Indicators of market's perception of creditworthiness

2012

2013

2014

0.2
7.5
-0.2

-3.5

70,077
-8.1
5,600
18,604
2.9
10.5

102,035
74.6
65.9
none
none

343.0
0.3
0.3
0.5

0.2
7.2
0.5

-4.8

64,364
-8.7
3,071
14,804
3.3
10.9

103,023
75.4
76.7
none
none

549.0
0.5
0.5
0.9

    -7.1 **
9.2 *

24.9

-4.6

51,770
-4.0
311
6,205

1.4 **

19.3

108,723 **
112.4 **
85.1 **
none
none

2,436.0
2.3
2.2
4.7

SBA 15.2bn USD
Jul 2010 - Dec 2012
Off track

none

SBA 17.0bn USD
Apr 2014 - Mar 2016
On track

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)
excluding the temporarily occupied territories of the Autonomous Republic of Crimea and the city of Sevastopol (EC staff estimate)

*
** does not include the deficit of state-owned Naftogaz ( 1.0% of GDP in 2012, 1.9% in 2013, 5.4% in 2014)

Caa1
B-
B-

B3
B
B

Caa3
CCC-
CCC

3.5.  Mediterranean partners 

3.5.1.  Egypt 

Despite  the  gradual  stabilisation  of  the  political  situation  in  Egypt,  the  underlying 
macroeconomic  situation  remains  relatively  weak  and  vulnerable,  affected  by  large  internal 
and external imbalances, and strongly dependent on substantial official inflows from the Gulf 
countries. Nevertheless, the Government has embarked on an ambitious, but reachable, reform 
path  aimed  towards  fiscal  consolidation  and  a  better  socially  targeted  and  sustainable 
economic  growth.  Relations  with  the  IMF  have  improved,  with  the  first  Article  IV 
Consultation  in  over  4  years  being  completed  in  January  2015,  but  recent  developments 
suggest that the Egyptian authorities will not seek a financial arrangement with the IMF in the 
short-term. 

Real  GDP  growth,  which  decelerated  to  around  2%  in  the  three  fiscal  years  after  the  2011 
revolution, seems to be picking up and is forecast to reach 3.8% in FY 2014/15, mainly on the 
back of domestic consumption and large public investments. Monetary policy continues to be 
supportive  of  the  growth  momentum,  but  remains  focused  on  containing  inflationary 
pressures  which  could  build  up  through  ongoing  currency  depreciation  and  fiscal  reforms, 
despite being on a downward trend since mid-2014. The unemployment rate remains at high 
levels,  closing  2014  at  over  13%,  up  from  9%  prior  to  the  2011  revolution.  Egypt's  fiscal 
position  remains  at  unsustainable  levels,  reaching  a  deficit  of  13.6%  of  GDP  in  FY13/14 
which  was  higher  if  taking  into  account  the  large  grants  provided  by  Gulf  countries.  The 

39 

 
 
 
Government has started to implement a fiscal consolidation plan which aims at reducing the 
fiscal  deficit  down  to  around  8%  of  GDP  in  FY2018/19,  a  still  very  high  level.  Total 
Government debt is expected to peak at around 90% of GDP this fiscal year, before gradually 
diminishing to a projected 80% of GDP in FY2018/19. 

On the external side, the balance of payments remains vulnerable, mainly due to a persistently 
high  trade  deficit,  although  the  current  account  deficit  has  been  supported  in  the  past  few 
years  by  large  official  inflows  from  Gulf  countries  of  around  USD  20  billion.  Reserves 
currently stand at around USD 16 billion, which represent an import cover ratio of just under 
3 months. 

Country-risk indicators : Egypt (1)
Output and prices

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

Public finances

General government balance

Balance of payments

2011/2012

2012/2013

2013/2014

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

2.2
12.4
7.3

2.1
13.0
9.8

2.2
13.4
8.2

(% of GDP)

-10.5

-14.1

-13.6

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)

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

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

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

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

34,086.7
-3.9
2,759.8
11,337.4
2.7
7.41

25,658.2
13.1
5.6
none
none

2,303.0
2.2
9.0
6.8

37,884.6
-2.4
2,783.4
11,210.8
2.5
9.11

33,400.3
15.9
5.7
none
none

2,087.0
2.0
6.2
5.5

32,139.2
-0.8
2,801.1
12,015.3
2.8
9.74

33,982.0
16.1
6.6
none
none

2,240.0
2.2
6.6
7.0

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)

B2 /negative
B /negative
B+ /negative

Caa1/negative Caa1/stable

CCC+
B-

B-/stable
B/stable

(1)  Fiscal year ends 30th June
*
** The Government withthdrew its request for an IMF programme in mid 2011. Discussions were renewed in early 2012 and 

Sources: IMF, Ministry of Finance, Central Bank of Egypt, EIU

a Stand-By was agreed at Staff level in November 2012 but was not finalised and is not expected to be in the short-term.

3.5.2.  Lebanon 

The  Lebanese  economy  continues  to  be  seriously  affected  by  the  conflict  in  Syria,  in 
particular  through  the  inflow  of  refugees,  the  disruption  of  its  trade  flows  and  the  negative 
impact on investor confidence and tourism. The Syria war is also affecting Lebanon's delicate 
balance  between  religious  and  political  groups,  exacerbating  its  political  stalemate  and 
delaying  critical  structural  reforms.  Lebanon’s  real  GDP  growth,  although  still  positive  (it 
accelerated from 1.5% in 2013 to 1.8% in 2014), remains very weak and still below the levels 
of 2010. The expectations of a recovery in 2015 (GDP growth is forecasted (IMF) at 2.5%) 

40 

 
 
 
carry a high degree of uncertainty given the volatile political situation in the region. Average 
inflation decelerated to 1.9% in at the end of 2014 (from 4.8% the year before), reflecting the 
reduction of international food and energy prices, and it's expected to reach 2.5% in 2015 as 
the effect of such reduction fades way. 

The  Syrian  refugee  crisis  is  causing  serious  strains  on  the  Lebanese  fiscal  situation,  which 
remains very weak.  Although the central government deficit decreased from 8.7% of GDP in 
2013 to 7.1% of GDP in 2014, this was largely a result of one-off factors, such as the arrears 
settlement  by  the  telecom  company.  Given  the  complex  domestic  political  situation,  little 
progress  has  been  made  with  key  pending  fiscal  reforms  such  as  tax  reform,  public  finance 
management  (the  Lebanese  parliament  has  not  approved  any  budget  since  2005)  and 
electricity  subsidies.  Gross  public  debt  remains  among  the  highest  in  the  world,  recording 
136% of GDP in 2014, and has again been in an increasing trend (from 134% in 2011). For 
2015, the Lebanese Ministry of Finance estimates a gross debt-to-GDP ratio of 137%. 

Lebanon's  current  account  deficit  remains  very  large  (19.4%  of  GDP  in  2014),  although  it 
declined  moderately  compared  to  2013  (20.7%  of  GDP)  supported  by  the  reduction  in 
imported energy prices and the weakness of domestic demand. The central bank maintains a 
very large foreign exchange reserve cushion (USD 39.6 billion), excluding gold holdings14, at 
end-2014, or the equivalent of about 20 months of imports). This contributes to the credibility 
of  the  currency  peg  against  the  US  dollar  and,  more  generally,  to  the  resilience  of  the 
Lebanese  economy.  However,  this  situation  is  increasingly  risky  and  may  become 
unsustainable  if  the  country's  large  macroeconomic  imbalances  are  not  addressed  and  the 
country loses its financial credibility meanwhile. 

14 Lebanon Central Bank holds around USD 11bn (as of end-December 2014) in gold reserves. 

41 

 
 
                                                 
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

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)

*  excludes gold and encubered assests
Sources: IMF, EIU

3.5.3.  Morocco 

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

(% of GDP)

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

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

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

2012

2013

2014

1.5
15.0
4.8

-9.0

1,770.0
-20.7
70.0
2,550.0
18.0
2,002.4

5,870.0
168.7
16.2
no
no

100.0
0.1
1.7
5.6

2.5
8.9
6.6

-8.6

1,840.0
-17.8
190.0
2,500.0
16.0
1,938.9

5,620.0
165.8
15.4
no
no

89.0
0.1
1.6
4.8

none

1.8
24.0
1.9

-8.5

1,800.0
-19.4
n.a.
2,980.0
21.0
2,003.8

6,290.0
173.1
n.a.
no
no

87.0
0.1
1.4
4.8

B1
B
B

B1
B-
B

B2
B-
B

The Moroccan economy performed well in 2013, with GDP growth accelerating from 2.7% in 
2012  to  4.5%  in  2013,  boosted  by  a  strong  rebound  in  the  agricultural  sector,  which  is 
estimated to have grown by almost 20% after a bad harvest in 2012. GDP growth is forecast 
to  remain  solid  in  2014,  at  3.9%.  The  fiscal  deficit  declined  from  7.3%  of  GDP  in  2012  to 
5.5% in 2013, owing to lower international oil prices that reduced the cost of subsidies as well 
as measures taken by the government to control spending. Average inflation remained low at 
1.9% in 2013, a slight decrease from the 2.3% registered in 2012. Expectations in the medium 
term  are  that  inflation  remains  below  3%  with  occasional  spikes,  as  certain  subsidies  are 
gradually  cut  back  due  to  their  significant  fiscal  cost.  Monetary  policy  remains  focused  on 
controlling inflation. The exchange rate continues to be tightly managed against a basket of 
euro-dominated currencies.  

Morocco's  current  account  deficit,  which  had  reached  a  substantial  9.7%  of  GDP  in  2012, 
narrowed  to  7.4%  in  2013  and  should  continue  to  decline  in  the  medium  term  thanks  to 
increased  domestic  production  and  lower  energy  imports.  The  current  account  deficit  was 
partly financed by the resilient capital account surplus, including substantial FDI flows.  

42 

 
 
 
Public debt continued its upward trend, gradually increasing from 54.4% of GDP in 2011 to 
61.9% in 2013. The level of total external debt also gradually increased from 25.1% of GDP 
at  year-end  2011  to  30.9%  at  year-end  2013,  as  Morocco  tapped  the  international  USD-
denominated bond market for the first time in December 2012 (for USD 1.5 billion) and again 
in May 2013 (USD 750 million). Still, it remains sustainable. Gross foreign reserves slightly 
increased  from  EUR  13.6  billion  at  year-end  2012  to  roughly  EUR  14.3  billion  at  year-end 
2013,  representing  4.1  months  of  the  following  year's  imports.  In  August  2012,  Morocco 
entered  into  a  two-year  USD  6.3  billion  financing  arrangement  with  the  IMF  under  the 
Precautionary  and  Liquidity  Line  (PLL).  The  Moroccan  authorities  have  not  drawn  on  the 
PLL so far and have not declared the intention to do so. 

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

2012

2013

2014

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

2.7
9.0
1.3

4.4
8.9
1.9

3.0
9.2
1.1

(% of GDP)

-€7.4

-5.5

-4.9

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)

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

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

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

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)

3.5.4. 

Syria 

20,703.6
-9.7
1,790.2
13,620.8
4.2
11.10

19,631.1
29.2
5.8
none
none

2,745.0
2.6
14.0
13.3

20,781.6
-7.6
2,258.9
14,532.0
4.3
11.20

21,685.9
30.2
6.7
none
none

3,020.0
2.9
13.9
14.5

26,601.9
-6.8
2,474.6
18,647.8
4.5
11.0

22,922.0
32.2
6.6
none
none

3,187.0
3.1
13.9
12.0

Precautionary 
Liquidity Line 
4.12 SDR
August 2012
on track

Precautionary 
Liquidity Line 
4.12 SDR
August 2012
on track

Precautionary 
Liquidity Line 
3.23bn SDR
July 2014
on track

Ba1 /stable

Ba1 /negative
BBB- /negative BBB- /negative

BBB- /stable

BBB- /stable

Ba1 /stable
BBB- /stable
BBB- /stable  

The outlook of the economic and financial situation of Syria is difficult to assess, given the 
significant disruption caused by the ongoing conflict and the scarcity of reliable figures. It is 
clear that the conflict is having a strong negative impact on the macroeconomic situation of 
the country and in particular its balance of payments position. Estimates of a drop of nominal 
GDP of 40% between 2010 and 2014 are not uncommon, but it is extremely hard to derive an 
accurate figure. 

43 

 
 
With the outbreak of the conflict in 2011, growth has been significantly affected by a sharp 
slowdown  in  trade,  tourism  and  private  investment,  as  well  as  the  extensive  destruction  of 
infrastructure. According to the Syrian Central Bureau of Statistics, average consumer prices 
more  than  tripled  between  2010  and  2013.  The  highest  increase  in  prices  by  far  (of  about 
360%)  was  recorded  in  Aleppo.  Price  increases  mainly  affected  various  categories  of  food, 
beverages,  utilities  and  fuel  due  to  the  sharp  lack  of  supply.  The  value  of  the  Syrian  pound 
(SYP) has declined markedly from an average of 66.57 SYP against the euro in 2011 to 81.62 
SYP in 2012, 140.83 SYP in 2013, and finally 204.1 SYP in 2014.  

It is clear that the main sources of revenues have been significantly affected by the conflict, 
including  oil  exports  (which  constituted  25%  of  government  revenue  in  2010)  and  customs 
revenue on imports. The pressure on the government budget will not ease as its expenditures 
on the military, subsidy and wages remain challenging.  

Considering the sharp drop in export revenue combined with the absence of any stable major 
net capital inflows, foreign exchange reserves are believed to have dropped considerably. The 
latest  IMF  data  available  indicates  exchange  reserves  around  EUR  16  billion  at  end-August 
2012. 

Country-risk indicators : Syria
Output and prices

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

Public finances

Central 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

(%)
(% 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)
(%)
(%)

none

2012 (est)

2013 (est)

2014 (est)

-19.5
25.0
37.4

-17.0

3,761.8
-10.6
n.a.
3,730.5
n.a.
91.8

6,587.8
19.2
n.a.
n.a.
n.a.

646.0
0.6
9.8
17.2

-20.6
35.0
89.6

-12.9

1,460.0
-15.9
n.a.
1,426.9
n.a.
191.1

7,457.3
24.0
n.a.
n.a.
n.a.

584.0
0.6
7.8
40.0

0.5
33
26

-10.7

1,779.1
-12.4
n.a.
1,524.5
n.a.
204.1

10,325.2
32.0
n.a.
n.a.
n.a.

445.0
0.4
4.3
25.0

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)

Syria defaulted on EIB loans for a total of EUR 167 million as at end-January 2014

*
Source:  Economist Intelligence Unit

none
none
none

none
none
none

none
none
none

44 

 
 
 
3.5.5.  Tunisia 

The Tunisian economy has been negatively affected by the domestic unrest that followed the 
2011  revolution,  regional  instability  (notably  the  war  in  Libya),  and  a  weak  international 
environment,  particularly  in  the  euro  area,  with  which  Tunisia  maintains  close  trade  and 
financial  links.  The  economy  experienced  a  recession  in  2011  and,  despite  the  moderate 
economic recovery witnessed in 2012, when tourism and foreign direct investment rebounded 
and economic activity picked up, the macroeconomic situation worsened in 2013 and remains 
weak  in  2014.  In  particular,  the  fiscal  and  balance  of  payments  situation  have  deteriorated 
quite markedly, generating important financing needs. Against this background, the Tunisian 
authorities  reached  in  mid-April  2013  an  agreement  with  the  International  Monetary  Fund 
(IMF)  on  a  24-  month  Stand-By  Arrangement  (SBA)  in  the  amount  of  USD  1.75  billion, 
which  was  approved  by  the  IMF  Board  on  June  2013.  The  Tunisian  government  also 
requested  Macro-Financial  Assistance  (MFA)  from  the  EU  in  August  2013,  which  was 
approved in May 2014 by Council and Parliament in the form of a EUR 300 million medium-
term loan (3 equal tranches of EUR 100 million each). 

Real GDP growth remains subdued, and is expected to slightly increase to 2.4% in 2014, from 
2.3%  in  2013  (and  against  an  original  government  forecast  of  4%).  A  slow  pickup  in 
economic activity amid political uncertainty and security tensions are negatively contributing 
to  the  modest  growth  rate.  Unemployment  remains  high  at  15.3%,  particularly  among  the 
young  and  graduates  (over  30%).  Inflation  has  averaged  around  5.5%  in  2014  and  is  on  a 
downward trend. The fiscal deficit remains high, but similarly to 2013 in 2014 it will over-
perform  (reaching  4.8%  against  an  original  forecast  of  6.7%),  also  mainly  due  to  an 
inadequate budget composition (including payment deferrals and underspending of the capex 
budget). The fiscal deficit for 2015 is now expected to jump to 6.2% of GDP instead of the 
originally  forecasted  4.5%,  due  partly  to  the  postponement  of  payments  and  of  fiscal 
consolidation measures. 

General government debt continued to increase, reaching 50% of GDP in 2014 and is forecast 
to peak at 57% of GDP by the end of 2017 before reversing the trend. However, debt service 
remains at a manageable 6.2% of total budget expenditures, or 1.8% of GDP. On the external 
side, the current account deficit has slightly improved but remains significantly high in 2014 
at  7.9%  of  GDP,  compared  to  8.3%  of  GDP  in  2013.  It  is  expected  to  improve  in  2015  to 
6.4%  of  GDP  on  the  back  of  lower  commodity  prices,  improved  price  competitiveness  and 
stronger  exports  and  tourism  growth.  Reserves  are  estimated  to  have  ended  2014  close  to 
USD 7.8 billion, at barely 3 months of imports, which compares to an initial target of USD 
9.0 billion under the IMF programme. However, this still represents USD 1 billion more than 
at end-2013. 

45 

 
 
Country-risk indicators : Tunisia
Output and prices

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

Public finances

Central government balance (inc. grants)

Balance of payments

Exports of goods 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

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

(% of GDP)

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

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

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

2012

2013

2014

3.7
16.7
5.9

-4.8

12,677.7
-8.2
1322
6,489
3.9
2.00

13,500
40.1
162.2
none
none

2,555.0
2.4
18.9
20.2

no

2.3
15.3
6.0

-6.0

13,182
-8.3
796
5,953
3.4
2.15

14,767
40.6
169.1
none
none

2,699.0
2.6
18.3
20.5

2.4
15.3
5.5

-4.5

12,705
-7.9
753
5,750
3.4
2.25

15,480
42.9
270.2
none
none

2,686.0
2.6
17.4
21.1

SBA
Jun-13
yes

SBA
Jun-13
yes

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)
Exports of services are only provided on a net basis

*

Baa3 /negative
BB /negative
BB+ /negative

Ba2
BB /negative
BB-

Ba3
BB-/negative
BB-/BB negative

3.6. 

Other countries 

3.6.1.  Brazil 

Following  rapid  expansion  in  the  years  preceding  the  global  economic  and  financial  crisis 
(+4.8% per year on average in 2004-2008), Brazil's  real  GDP  growth  has  been  decelerating 
since 2011 (+2.1% p.y. o.a. in 2011-2013) and 2014 is expected to mark the country's lowest 
performance since 2009. In the third quarter of 2014, GDP expanded by +0.1% (quarter-on-
quarter), re-entering positive territory by only a slight margin after two quarters of contraction 
(-0.2% in Q1 and -0.6% in Q2). The subdued performance was mainly due to stagnant private 
consumption (+0.3% q-o-q; +0.1% y-o-y) and weak gross fixed capital formation (+1.3 q-o-q; 
-8.5%  y-o-y).  A  depreciating  Real  and  lower  oil  prices  were  not  sufficient  to  boost  export 
growth  (+1.0%  q-o-q),  which  remained  constrained  by  domestic  supply-side  bottlenecks. 
With imports growing relatively faster (+2.4% q-o-q), Brazil's current account deficit widened 
further to reach 4.2% of GDP in December 2014 - the largest deficit since 2001. 

The  European  Commission  currently  forecasts  GDP  growth  in  2014  to  be  virtually  flat  at 
+0.2%, before gradually picking up to +0.7% in 2015 and +1.8% in 2016. The recent growth 
deceleration has been weighing on Brazil's public finances: the general government debt-to-
GDP  ratio  rose  from  54.2%  in  2011  to  60.7%  in  2014  Q3,  while  the  public-sector  primary 
fiscal  balance  fell  from  a  surplus  of  3.1%  of  GDP  in  2011  to  a  deficit  of  0.6%  of  GDP  in 
2014. These growth and public finance developments prompted Moody's to revise its outlook 

46 

 
 
 
for Brazil's long-term foreign currency rating (Baa2) from stable to negative, while Standard 
and Poor's downgraded Brazil's sovereign debt by one notch, from BBB to BBB-. In an effort 
to restore investor confidence, the new Finance Minister Joaquim Levy announced a number 
of  fiscal  adjustment  measures,  including  tax  hikes  and  spending  cuts.  The  Brazilian  Central 
Bank  has  also  undertaken  a  tightening  cycle  in  the  past  two  years,  gradually  raising  the 
benchmark  interest  rate  to  12.25%  in  January  2015  from  7.25%  in  March  2013.  Consumer 
price  inflation  however  remains  elevated  at  7.1%  in  January  2015,  breaching  the  Central 
Bank's upper tolerance threshold of 6.5% and marking the highest rate since April 2013. 

Looking  forward,  some  of  Brazil's  major  policy  challenges  will  be  to  ensure  the  effective 
implementation  of  the  structural  reforms  designed  to  revive  economic  growth,  and  to 
safeguard  the  buffers  necessary  to  shield  the  economy  from  the  potential  capital  flow 
volatility  that  could  accompany  the  normalisation  of  US  monetary  policy.  However,  the 
Brazilian  economy  is  expected  to  remain  resilient  to  possible  external  shocks,  due  to  the 
reasonable  level  of  official  reserves  (EUR  293  bn  in  December  2014,  covering  approx.  20 
months of imports), the limited exposure to foreign-currency-denominated debt (14% of GDP 
in 2013) and the strengthened macro-prudential framework developed since 2009. 

Country-risk indicators : Brazil
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

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)

e means EU Commission estimation

3.6.2. 

South Africa 

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

(% of GDP)

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

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

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

2012

2013

2014

1.0
5.5
5.8

-2.8

184,907.4
-2.4
57,686
280,422
19.4
2.5

237,152.0
13.9
22.3
0.0
none

942.0
0.9
0.4
0.5

2.5
5.4
5.8

-3.3

176,721.4
-3.6
58,992
259,285
18.0
2.9

227,042.6
14.0
30.9
0.0
none

1,002.0
1.0
0.4
0.6

0.2
4.3
6.5

-6.0 e

182,549.7

-4.0 e

50,681.0
292,818
20.6
3.1

286,320.1

15.8 e
39.3

0.0 e

none

975.0
0.9
0.3
0.5

no

no

no

Baa2 /positive
BBB /stable
BBB /stable

Baa2 /stable
BBB /negative
BBB /stable

Baa2 /negative
BBB- /stable
BBB /stable

Real GDP growth in South Africa has been on a decelerating trend since 2011, shifting from a 
5.2% annual average in the pre-crisis period (2004-2007) to a 2.5% annual average in 2011-
2014.  In  2014,  the  five-month  strike  that  took  place  in  the  platinum  industry  was  a  major 

47 

 
 
 
factor in explaining the GDP contraction in the first quarter (-0.4% quarter-on-quarter). The 
termination of the strike drove GDP growth back into positive territory in the remaining three 
quarters of 2014. Annual GDP growth reached 1.5% in 2014, the lowest rate since 2009.  

Looking forward, growth is expected to pick up only modestly. The government has recently 
revised its growth forecast downwards to 2% in 2015, 2.4% in 2016 and 3% in 2017. South 
Africa's  growth  performance  remains  constrained  by  domestic  structural  bottlenecks, 
including  frequent  strikes,  lack  of  skilled  labour,  recurrent  power  supply  shortages  and 
underdeveloped infrastructure in some parts of the country. At the same time, unemployment 
remains  extremely  high  (official  unemployment  rate  hovers  around  25%),  contributing  to 
persistently  large  income  inequality.  On  the  external  front,  tighter  monetary  policy  in  the 
United  States  could  result  in  further  depreciation  of  the  rand  and  renewed  financial  market 
turbulence with a possibility of increased capital outflows.    

With respect to medium-term macroeconomic challenges, the persistence of elevated inflation 
(6.1%  in  2014)  has  limited  the  room  for  accommodative  monetary  policies.  Inflation  has 
eased somewhat in the first quarter of 2015 but it is likely to move up again as the effects of 
lower oil prices fade away and electricity tariffs will increase sharply in the course of 2015. In 
addition, rising  government deficit (4.1% of GDP  in 2014) and  public debt (around  46% of 
GDP in 2014), together with decelerating GDP growth, prompted the main rating agencies to 
revise  their  outlook  (from  stable  to  negative  for  Fitch)  or  to  downgrade  their  long-term 
foreign currency rating (from Baa1 to Baa2 for Moody's, and from BBB to BBB- for Standard 
and Poor's). In October 2014, the new Finance Minister Nhlanhla Nene however committed to 
gradually  reduce  the  government  deficit  through  a  mix  of  spending  cuts,  tax  rises  and 
privatisation of non-core assets. While South  Africa's public debt-to-GDP ratio still remains 
contained, some fiscal adjustment will be necessary to preserve the country's creditworthiness 
in the medium and long run. 

48 

 
 
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

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)
EU Commission estimates for 2014 

*

3.6.3.  Tajikistan 

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

(% of GDP)

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

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

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

2012

2013

2014

2.2
24.9
5.7

-4.4

66,216.8
-5.0
3,521.5
33,345.1
5.2
10.6

107,886.2
37.0
7.9
none
none

1,230.0
1.2
1.1
1.9

2.2
24.1
5.4

-3.9

60,954.8
-5.8
5,923.9
32,802.8
5.4
12.8

99,757.2
39.1
11.5
none
none

982.0
1.0
1.0
1.6

1.5
24.3
5.3

-4.1

67,000.0
-5.4
6,000.0
39,820.0
6.2
14.4

115,000.0
40.0
12.0
none
none

1,133.0
1.1
1.0
1.7

no

no

no

Baa1 /negative Baa1 /negative
BBB /negative
BBB /negative
BBB /stable
BBB+ /negative

Baa2 /stable
BBB- /stable
BBB /negative

Real  GDP  growth  is  projected  to  ease  to  6  percent  in  2014  from  7.4  percent  in  2013. 
Declining remittances are weighing on the services sector, and there has been a sharp fall in 
cotton  and  aluminium  exports  due  to  global  market  developments  in  2014.  Growth  is 
expected  to  remain  weak  in  2015  due  to  the  adverse  external  environment,  particularly  in 
Russia, and the slow pace of structural reforms, though some support might come from China 
and  South  Asia.  Inflation  increased  in  2014  on  the  back  of  gradually  rising  costs  for  food, 
transport, and utilities, and weakening of the national currency (the somoni). 

The structural weakness of the economy makes it highly vulnerable to deteriorating external 
environment. Tajikistan relies heavily on remittances and a narrow exports base (aluminium, 
cotton  and  electricity)  in  its  external  current  account.  A  weak  economic  outlook  for 
Tajikistan's  main  economic  partners  (China  and  particularly  Russia)  is  expected  to  have  a 
significant negative impact through remittances, trade and investment channels. International 
reserves  of  the  central  bank  remain  low  (covering  1.5  months  of  imports  at  year-end  2012) 
and the initial fiscal policy space is very limited. Tajikistan's agreement with the IMF for an 
Extended Credit Facility (ECF) expired in May 2012. Negotiations over a new IMF-supported 
successor program are ongoing but have not brought any concrete result so far.  

In March 2014 Tajikistan made repaid the outstanding MFA loan to the EU. 

49 

 
 
 
Country-risk indicators : Tajikistan
Output and prices

Real GDP growth rate - IMF
Unemployment*
Inflation rate (CPI) (year average) - IMF

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

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

(% of GDP)

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

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

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

2012

2013

2014

6
n.a.
6.6

-0.6

-4.7

6.45

7.4
n.a.
5.8

0.6

380.0
-1.5
13.
411.
1.4
6.42

1,504
35.4
5.9
none
none

7.4
n.a.
5.0

-0.8

387.5
-1.4
39.
515.
1.5
6.11

1,759
32.3
10.4
none
none

16.0
0.0
1.1
4.2
Extended Credit Facility 
(April 2009 - May 2012) expired

4.0
0.0
0.2
1.0

0.0
0.0
n.a.
n.a.

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)

* annual average, officially registered

none
none
none

none
none
none

none
none
none

50