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 2015
Date: 2016-09-13
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, 13.9.2016  
SWD(2016) 292 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 2015 

{COM(2016) 576 final} 

EN 

   EN 

 
 
 
 
  
 
Table of Contents 

1. 

2. 

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

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

2.1. 

Loan operations covered by the EU budget guarantee................................................. 6 

2.1.1.  EU loan operations to Member States.......................................................................... 6 

2.1.2.  EU loan operations to non-Member States .................................................................. 7 

2.1.3.  Guarantees given to the EIB ........................................................................................ 7 

2.2. 

Cumulative and annual EU budget guarantee exposures........................................... 10 

2.3.1.  EU loans operations to Member States ...................................................................... 12 

2.3.2.  EU loans operations to non-Member States............................................................... 12 

2.3.3.  Guarantes given to the EIB ........................................................................................ 13 

2.4. 

Payment under the EU budget guarantees ................................................................. 14 

2.4.1.  EU loan operations..................................................................................................... 14 

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

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

3. 

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

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 

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

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

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

3.3. 

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

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

3.3.2.  Bosnia and Herzegovina ............................................................................................ 34 

2 

 
 
3.4. 

ENP countries ............................................................................................................ 36 

3.4.1.  Armenia...................................................................................................................... 36 

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

3.5. 

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

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

3.5.2.  Lebanon...................................................................................................................... 41 

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

3.5.4.  Syria ........................................................................................................................... 44 

3.5.5.  Tunisia........................................................................................................................ 46 

3.6. 

Other countries ........................................................................................................... 48 

3.6.1.  Brazil .......................................................................................................................... 48 

3.6.2.  South Africa ............................................................................................................... 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 2015. 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.  Countries  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  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. 

2. 

Overview of capital loan operations covered by the EU guarantee 

The  graph  hereunder  shows  the  breakdown  of outstanding  amounts  by  financial  instrument. 
Each financing facility is detailed in the sections below. 

4%

0%

7%

33%

56%

ATOM

BOP

EFSM

EIB

MFA

4 

 
 
 
 
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 IN RESPECT OF OPERATIONS DISBURSED at 31.12.2015 (in EUR million)

Operations

ceiling (a)

outstanding (b)

outstanding (b)

(minus cancellation)

Authorised

Capital

Capital

Amount signed

at 31.12.2014

at 31.12.2015

but not disbursed

MEMBER STATES

EIB (1)

Euratom (2) 

Bulgaria

Romania

BOP

Hungary

Latvia

Romania

EFSM

Irlande

Portugal

MEMBER STATES - TOTAL

THIRD COUNTRIES

Macro-Financial Assistance

   Albania

   Armenia

   Bosnia and Herzegovina

   fYRoM

   Georgia

   Jordan

   Kyrgyzstan

   Montenegro

   Serbia

   Tunisia

   Ukraine

Euratom (2)

EIB

EIB Pre-Accession countries 

EIB Neighbourhood and Partnership countries (3)

EIB Asia and Latin America

EIB South Africa

EIB Climate Change Mandate

THIRD COUNTRIES - TOTAL

GRAND TOTAL

4,000

6,500

3,100

5,000

22,500

26,000

9

65

140

90

23

180

15

7

473

300

3,410

37,842

43,927

11,764

2,852

2,000

98,386

2,315

1,971

121

204

1,500

1,900

5,000

22,500

24,300

57,840

9

65

124

34

0

0

0

5

232

0

1,360

24

10,322

10,048

2,761

827

474

26,284

84,124

98

185

1,500

700

3,500

22,500

24,300

54,754

9

65

120

24

10

180

5

4

180

200

2,210

17

10,364

10,484

3,158

831

579

28,440

83,194

83

0

0

0

0

0

0

0

83

0

0

0

0

13

0

10

0

0

100

1,200

300

3,781

10,535

2,202

308

1,331

19,780

19,863

(1) There is no ceiling as it concerns countries which were not Member States at the time the EIB mandates were adopted.

(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.

(a) Authorized ceiling: this is the aggregate of the maximum amounts of capital authorised (ceilings) for each operation 

decided by the Council or by the European Parliament and the Council.

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

5 

 
 
 
 
 
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, Euratom (table A2a) and EIB guaranteed financing operations (table A3). 

Instrument

Decision

TABLE A2a: BoP, EFSM and Euratom lending operations to Member States  (EUR million)
Period 01.01.2015 - 31.12.2015

Date of
decision

Availability
period
(for Request for Funds)

Loan situation

 - closed (a)
 - partially disbursed (b)
 - disbursed in full (c)
 - not yet disbursed (d)

Amounts
decided

Amounts
outstanding
at 01.01.2014

Operations 
made in 2015

Amounts
disbursed

Amounts
repaid

Amounts
outstanding
at 31.12.2015

BOP

2002/332/EC (*)

18/02/2002

50,000.00

16,600.00

8,400.00

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 

2013/531/EU

22/10/2013

closed on 30/09/2015

EFSM

2010/407/EU

11/05/2010

2011/77/EU 

07/12/2010

2011/344/EU

17/05/2011

EURATOM

94/179/Euratom

77/270-271/Euratom 29/03/1977
18/04/2000

SEC(2000)661/2

C(2004)891

30/03/2004

closed

closed

closed

closed

Ireland

Portugal 

Bulgaria

Romania

TOTAL

(b)

(b)

(c)

(a)

(c)

(b)

(c)

(c)

6,500.00

1,500.00

3,100.00

1,900.00

5,000.00

5,000.00

2,000.00

60,000.00

48,500.00

46,800.00

4,000.00

22,500.00

22,500.00

26,000.00

24,300.00

436.00

212.50

223.50

324.32

120.82

203.50

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2,700.00

5,700.00

0.00

1,500.00

1,200.00

700.00

1,500.00

3,500.00

0.00

0.00

0.00

41.63

22.63

19.00

46,800.00

22,500.00

24,300.00

282.69

98.19

184.50

65,536.00

55,524.32

0.00

2,741.63

52,782.69

(*) 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
(**) Means that no further request for disbursement is possible (either because the total amount has been disbursed or because the facility has expired)

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). 

   Country

Decision

Date

of decision

Availability

Period

Period 01.01.2015 - 31.12.2015

Loan situation

 - closed (a)

 - partially disbursed (b)

Amounts

decided

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

(for Request for Funds)

 - disbursed in full (c)

 - not yet disbursed (d)

Amounts

outstanding

at 31.12.2014

Operations made in 2015

Amounts

disbursed

Amounts

repaid

Amounts

outstanding

at 31.12.2015

MFA

ALBANIA

ARMENIA

BOSNIA AND 
HERZEGOVINA 

FYROM

GEORGIA

JORDAN

KYRGYZ REPUBLIC

MONTENEGRO*

SERBIA *

TUNISIA

UKRAINE

2004/580/EC

29.04.04

closed

2009/890/EC

30.11.09

closed

99/325/EC
02/883/EC
2009/891/EC

97/471/EC
99/733/EC

10.05.99
09.11.02
30.11.09

22.07.97
08.11.99

closed
closed
closed

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

25/11/2016

2001/549/EC*
2002/882/EC*

2001/549/EC*
2002/882/EC*
2009/892/EC

16.07.01
09.11.02

16.07.01
09.11.02
30.11.09

closed
closed

closed
closed
closed

534/2014/EU

15.05.14

04/09/2017

2002/639/EC
2010/646/EC
2014/215/EU
EU/2015/601

EURATOM

UKRAINE (Euratom)

94/179/EC

closed
closed
closed
03/01/2018

12.07.02
7.07.10
14.04.14
15.04.15

21.03.94
15.03.07
06.10.08
15.10.09

(c)

(c)

(c)
(c)
(c)

(c)
(c)

(b)

(b)

(b)

(c)

(c)
(c)
(b)

(b)

(c)
(c)
(c)
(b)

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

2,802,192.00

1,828.60

1,245.00

67.00

3,006.60

9.00

65.00

124.00

33.60

0.00

0.00

0.00

5.18

10.00

180.00

5.00

9.00

65.00

120.00

4.00

10.00

23.60

10.00

180.00

5.00

4.14

1.04

231.82

51.96

179.86

9.00

65.00

20.00
20.00
100.00

40.00
50.00

23.00

180.00

15.00

225.00
55.00

225.00
55.00
200.00

300.00

0.00

1,360.00

110.00
500.00
1,000,000.00
1,800,000.00

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

of USD 83 million

24.32

24.32

200.00

850.00

0.00

200.00

2,210.00

6.88

6.88

17.44

17.44

TOTAL

1,852.92

1,245.00

73.88

3,024.04

* 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

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; 

1 

Within each portfolio individual EIB loans are, de facto, guaranteed at 100% until the global ceiling is 
reached. 

8 

 
 
 
 
 
                                                 
- 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. 

2  
3  
4  

5  

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 31.12.2015 (in EUR million)

Operations 

ceiling

(a)

disbursed

capital

Authorised

Net signatures

Amounts

Outstanding 

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)

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

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

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 65 % (1)

sub-total 70 % (1)

sub-total 75 % (1)

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
1,040
2,912
936
2,000

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

76,544
7,477
3,770
2,310
1,022
375

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

7,712
6,653
4,700
750
903

300

6,920

1,157

4,227

1,656

2,571

1,386

768

478

140

150

28,648
9,001
13,045
9,259
3,786
3,762
2,543
1,219
910
1,930

18,717
6,712
5,896
2,105
817

3,187

54,285
6,482
477
1,587
809
375
3,235

6,482
7,047
590
4,478
1,980

7,047
5,320
29
315
710

285

3,982

526

20

149

39

110

357

277

80

-

0

17,666
6,809
6,863
5,446
1,417
2,662
2,056
606
752
580

17,978
6,261
5,691
2,105
817

3,105

36,170
6,482
477
1,587
809
375
3,235

6,482
7,047
590
4,478
1,980

7,047
5,320
29
315
710

285

3,982

525

20

150

39

111

355

275

80

-

0

16,388
6,357
6,500
5,174
1,326
2,344
1,786
558
608
579

9,102
3,853
3,253
428
183

1,385

26,014
906
127
156
31
40
552

906
166
8
156
2

166
301
-
268
1

-

32

sub-total 100 % (1)
Total  

6,653
98,386

5,320
73,135

5,320
55,020

301
27,387

(1) Percentage figures relate to the Guarantee rate.

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

(3) Including Turkey Terra and Special Action Turkey.

(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

Date
of decision

Rate
of guarantee

Date of the 
Guarantee Agreement

Amount
decided

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

MED. Financial protocols(1)
MED. Horizontal cooperation
TOTAL MED. (3)
C and E Europe I

1762/92/EEC

08.03.77
29.06.92

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%

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

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) 
1080/2011/EU (13)
466/2014/EU (14)

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
22.07.14/25.07.14

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

of 13.10.2011,  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 20156. 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 based on the amounts (capital and interest) due under MFA, BOP, Euratom, EFSM and EIB 
operations disbursed at 31.12.2015 (in EUR million)

Ranking

Country

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

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

2017

2016

2018

2019

83.52

553.50 1,153.50
607.25 4,507.25
603.48

2020

2021

2022

2023

2024-
2050

Total 
repayments 
due
539.25
30,742.38 5,434.13
484.88
609.39
29,586.39
554.91 1,007.21
9,263.22
970.16
314.19 1,453.68 1,604.33 1,188.71
5,241.12
51.72
124.34
3,421.63
217.61
246.04
3,124.25
278.87
256.47
2,887.25
246.68
230.85
2,273.66
185.98
203.75
2,047.89
0.00
1,560.91 1,558.78
61.84
89.52
1,101.91
168.56
285.13
1,065.00
72.87
60.05
1,058.35
524.05
27.10
840.28
43.30
40.52
664.18
143.93
16.88
651.13
54.84
3.71
526.23
60.35
88.62
486.17
54.85
83.24
467.66
54.62
56.54
389.01
30.72
17.01
365.64
22.89
38.73
340.64
34.11
38.88
306.84
26.84
23.26
284.39
24.00
26.47
251.30
11.89
5.10
245.61
23.48
25.05
242.70
21.28
24.29
235.24
47.20
53.03
232.83
15.58
14.72
205.91
2.61
5.28
195.76
13.27
6.30
183.35
9.62
27.34
159.84
18.90
29.36
142.21
12.62
43.66
129.96
13.40
14.66
116.09
7.80
6.43
99.78
8.82
31.11
92.96
3.46
3.33
79.55
3.60
0.49
67.45
50.16
4.24
62.87
3.39
4.66
46.36
0.65
16.11
39.39
6.37
10.02
36.97
2.46
3.69
35.98
0.00
13.78
22.96
3.74
6.40
20.29
2.74
4.60
17.86
2.30
5.49
16.97
0.00
0.00
15.27
0.00
0.00
12.24
2.18
2.39
9.14
0.00
4.98
7.45
0.07
0.07
5.96
0.00
2.09
2.09

266.25 11,926.75
379.88 2,379.88 16,648.13
525.11 3,767.32
599.92
243.58
96.07
103.31 1,971.56
112.61
217.22 1,249.26
214.43
944.08
184.39
213.95
603.85
130.95
148.50
762.17
99.70
117.27
0.00
0.00
0.00
456.70
72.12
72.72
112.45
20.11
20.31
477.81
113.62
65.31
211.50
5.75
5.75
325.06
42.81
44.68
331.46
28.81
22.81
244.56
52.93
53.41
47.09
19.92
27.04
43.81
23.11
30.32
36.81
19.74
26.39
169.96
15.01
19.59
181.55
6.76
6.76
54.34
20.89
23.74
85.73
19.86
22.05
73.74
14.65
17.32
159.97
12.45
13.47
51.73
22.66
22.87
79.78
10.49
13.54
0.00
0.00
6.32
90.39
11.57
12.65
137.23
13.14
13.40
74.19
14.73
17.49
39.07
10.71
10.93
0.00
0.00
16.41
0.00
0.00
10.99
22.32
6.05
7.09
45.66
3.56
6.15
0.00
0.00
0.00
51.53
3.72
3.65
39.81
4.71
4.83
0.00
0.00
0.00
13.68
3.26
3.26
0.00
0.00
0.00
0.00
0.00
0.00
15.09
2.46
2.46
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
11.45
0.95
0.95
10.02
0.72
0.74
0.00
0.00
0.00
0.00
0.00
0.00
5.41
0.07
0.07
0.00
0.00
0.00
101,728.48 10,718.50 5,713.52 9,949.55 5,907.87 4,332.98 13,153.20 5,548.58 4,587.65 41,816.62
69,153.78 8,160.08 2,825.45 7,446.25 2,873.50 1,298.57 11,003.32 3,610.75 2,785.44 29,150.42
32,574.70 2,558.42 2,888.07 2,503.31 3,034.37 3,034.41 2,149.88 1,937.83 1,802.20 12,666.20
67.98% 76.13% 49.45% 74.84% 48.64% 29.97% 83.66% 65.08% 60.72% 69.71%

539.25 7,289.25 3,040.50
484.88 3,484.88
625.98
609.13
113.84
143.18
122.63
723.22
252.47
247.00
224.29
234.52
199.07
207.14
121.52
132.99
0.00
0.00
76.00
89.28
36.21
261.45
69.95
75.06
6.46
7.17
41.39
42.05
28.18
26.04
53.89
54.36
36.13
45.35
39.32
46.52
31.40
52.28
25.79
28.22
6.76
18.06
28.49
32.63
26.40
27.13
19.27
20.79
13.62
12.24
23.07
23.27
17.88
18.59
12.87
13.19
15.74
15.04
13.66
0.00
18.80
16.80
12.28
11.73
17.24
18.07
11.53
12.07
11.52
12.98
8.59
8.27
0.00
0.94
3.58
3.52
4.95
5.07
0.00
0.00
3.26
3.26
0.00
0.00
0.00
3.19
2.46
2.46
0.00
0.00
0.00
1.72
0.78
1.83
0.00
0.00
0.95
0.95
0.75
0.00
0.00
0.00
0.00
0.00
0.07
0.07
0.00
0.00

125.54
254.09
268.88
253.42
221.89
0.00
101.16
58.95
62.64
26.22
43.86
28.72
4.26
80.00
68.01
55.43
30.11
24.56
35.77
26.35
30.05
11.36
23.68
23.65
49.14
15.65
5.22
12.57
16.81
20.69
13.16
13.82
7.04
21.43
3.41
2.49
4.24
5.59
6.68
7.38
2.46
0.00
4.22
3.49
4.59
0.00
0.00
2.25
0.00
0.07
0.00

86.70
226.14
281.79
253.20
202.61
2.12
82.58
101.82
61.04
26.28
40.49
24.29
4.26
81.68
78.47
55.81
29.23
34.56
38.00
26.77
25.01
5.51
26.89
25.73
51.08
14.57
5.22
9.20
21.37
21.54
25.93
14.24
6.29
30.67
3.37
1.48
4.24
5.99
15.95
10.02
2.46
9.19
4.22
4.42
4.59
0.00
0.00
2.32
2.47
0.07
0.00

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  Guarantee  Fund  for 
external Actions. 

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 2015, Member States represented 76.1% 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  31.12.2015  for  the 
period 2016-2022 (based on amortization plans of existing loans) 

12,000.00

10,000.00

8,000.00

6,000.00

4,000.00

2,000.00

0.00

ATOM

BOP

EFSM

EIB

20162017 2018 2019 2020 2021 2022 2023

EFSM

ATOM

As  Graph  1  illustrates,  the  main  risk  for  the  EU  budget  is  linked  to  EFSM  loans,  which 
represent 85% of the total outstanding of Member States. 

2.3.2.  EU loans operations to non-Member States 

In 2015, non-Member States represented 23.9% 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 

 
 
 
15,000.00

10,000.00

5,000.00

0.00

ATOM

MFA

EIB

2016 2017 2018 2019 2020 2021 2022 2023

ATOM

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 

97.1,5%  of  the  2007-2013  EIB  external  Mandate  has  been  signed  but  an  amount  of 
EUR 11,061  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 31.12.2015)

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

9,001
13,045
3,762
910
1,930
28,648

2,193
6,223
1,156
158
1,331
11,061

(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 31.12.2015.

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

14 

 
 
 
 
Table A5b: EIB loan balances remaining to be disbursed under 2014 - 2020 financial framework (at 31.12.2015)

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

Ceiling

Net signatures (a)

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

1,157
4,227
1,386
150
6,920

EUR million

Balances
to be disbursed (b)

1,137
4,106
1,046
150
6,439

(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 31.12.2015.

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 

15 

 
 
 
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 
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. 

7 

8  

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). 
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. 

16 

 
 
                                                 
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. 

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. 

9 

10 

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 
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 

 
 
                                                 
Explanatory notes for country-risk indicators 

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.  The  higher  the  ranking  number,  the 
lower the creditworthiness of the country. 

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 

18 

 
 
 
3.1.  Member States 

3.1.1.  Bulgaria 

Bulgaria’s GDP expanded by 3.0% in 2015, according to first estimates. Growth is forecast to 
moderate to 1.5% in 2016, before picking up to 2.0% in 2017. Stronger growth in 2015 has 
been primarily the result of higher net exports, but domestic demand is expected to increase 
and  gradually  replace  net  exports  as  the  main  growth  driver  by  2017.  Private  consumption 
growth is expected to strengthen from 0.7% in 2015 to 1.4% in 2016 and 1.7% in 2017. Public 
investment is expected to drop in 2016 with the slowdown of the implementation of projects 
co-financed by the EU, before resuming growth in 2017. 

According  to  the  Commission  2016  winter  forecast,  the  general  government  deficit  is 
estimated  to  fall  to  2.5%  of  GDP  in  2015,  following  a  temporary  jump  to  5.8%  of  GDP  in 
2014  as  a  result  of  sizeable  one-off  support  to  the  financial  sector.  The  headline  deficit  is 
forecast to decrease to 2.3% of GDP in 2016 and to 2.0% of GDP in 2017. The improvement 
reflects  measures  on  the  revenue  side,  such  as  an  increase  in  excise  duties  and  in  social 
security contributions in 2017 as well as limited rise in expenditures. 

The general government gross debt increased from 18.0% of GDP in 2013 to 27.0% in 2014, 
reflecting the 2014 budgetary deficit but also the pay-out of guaranteed deposits, the support 
of the financial sector via a liquidity scheme and the pre-financing for a roll-over of a large 
bond maturing in January 2015. The gross public debt ratio is forecast to increase to 30.7% of 
GDP  by  2017.  Bulgaria  is  under  the  preventive  arm  of  the  Stability  and  Growth  Pact. 
Although  the  deficit  reached  5.8%  of  GDP  in  2014,  the  Commission  concluded  in  its 
November  2015  report  that  the  excess  over  the  reference  value  could  be  qualified  as 
exceptional and temporary and also taking into account all relevant factors. 

19 

 
 
 
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)

* Commission 2016 Winter Forecast
**  Debt service is based on the fiscal 

3.1.2.  Hungary 

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

(% of GDP)

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

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

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

2013

2014

2015*

1.3
13.3
-0.9

-0.8

28,074
-0.5
1,243.1
14,426
6.1
1.96

36,935.6
88.1
4.7
none
none

639.6
0.6
1.7
0.2

1.5
10.4
-2.0

-5.8

27,836
0.7
877.1
16,534
7.0
1.96

39,356.5
92.1
4.4
none
none

553.2
0.5
1.4
0.2

2.2
9.1
-0.9

-2.5

29,115
1.9
1,515.8
20,285
8.6
2.0

34,090.9
77.2
4.1
none
none

467.7
0.5
1.4
0.2

Baa2
BBB
BBB-

Baa2
BBB
BBB-

Baa2
BB+
BBB-

In  2015,  the  Hungarian  economy  grew  by  2.9  %,  down  from  3.7  %  in  2014.  After  a  deep 
double dip recession, a steady recovery started in early 2013. The rebound was helped by a 
modest  recovery  in  Europe  and  a  strong  pick-up  in  EU-funded  investment.  More  recently, 
economic growth was driven by private consumption and net exports supported by improved 
cost competitiveness. With the cyclical upturn, the unemployment rate declined from about 11 
%  in  2010-2012  to  6  ¾  %  in  2015,  while  the  activity  rate  increased  from  around  63  %  in 
2010-2012 to 69 % in 2015. At same time,  significant employment gains are attributable to 
the extension of the public work scheme. Inflation rate stabilised around zero in the past two 
years,  following  a  steep  fall  in  2013  driven  by  global  factors,  low  food  prices  and  cuts  in 
regulated energy prices. The trade balance surplus of goods and services increased to around 
8.5%  of  GDP  in  2015  from  7.4%  in  2014.  At  the  same  time,  the  combined  current  account 
and capital account surplus is expected to reach a record high of more than 8.5% of GDP in 
2015 reflecting also the accelerated EU fund absorption.  

From  its  peak  level  of  close  to  81  %  in  2011,  the  public  debt-to-GDP  ratio  is  estimated  to 
have declined to below 76 % by 2015. The reduction of debt has been largely facilitated by 
the  takeover  of  private  pension  assets,  the  effect  of  which  was  partly  offset  by  negative 
revaluation effects. In addition, the primary balance moved to a surplus position since 2012. 
The debt trajectory is expected to remain on a declining path. Over the short term, Hungary 
does not appear to face risks of fiscal stress. The foreign exchange exposure of government 

20 

 
 
                  
                  
 
debt  has  been  decreasing.  The  share  of  foreign  exchange  denominated  component  in  the 
public  debt  declined  from  around  40%  in  2014  to  33%  by  2015,  which  was  the  result  of 
central bank's policies channelling the extra liquidity of domestic banks to the sovereign bond 
market.  Government  debt  financing  has  been  supported  by  favourable  market  conditions. 
Since January 2014, sovereign yields have considerably decreased reflecting global monetary 
loosening and declining risk premiums.  

Hungary  faces  decreasing  but  still  substantial  short-term  external  rollover  needs  at  around 
20%  of  GDP  (or  EUR  22  billion).  However,  the  high  level  of  foreign  exchange  reserves 
(amounting to EUR 30.3 billion at the end of December 2015) of the central bank provides a 
safeguard against liquidity shocks and other funding risks, covering more than four months of 
imports. Hungary has already repaid over 70% of the originally disbursed amount of the EU 
balance of payments loan by November 2014, 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)
On track

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

(% of GDP)

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

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

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

2013

2014

2015

1.9
10.2
1.7

-2.5

89,038.6
3.9
-1,027.6
33,782.5
4.7
296.9

89,418.4
88.3
23.6
none
none

3,752.3
3.6
4.2
4.2

3.7
7.7
-0.2

-2.5

96,391.3
2.2
-2,721.4
34,578.3
4.6**
314.9

87,079.5
83.5
19.4
none
none

1,623.9
1.6
1.9
1.7

2.9
6.8
-0.1

-2.5

n.a.
5.0*
n.a.
n.a.
n.a.
313.1

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

1,560.9
1.5
n.a.
n.a.

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)

Caa1
CCC+
B-

Caa1
B-
B

B3/stable
B-/stable
B/stable

*

Sources:Commission services' 2016 winter forecast
The figure was recalculated with the end-of-the-year official MNB exchange rate

**
*** Calculations based on Commission services' 2016 winter forecast for imports
**** Excluding direct investment debt instruments

21 

 
 
 
 
3.1.3. 

Ireland 

The  vigorous  recovery  that  began  in  2014  widened  and  accelerated  further  in  2015.  The 
economy reached a turning point in 2014 with real GDP growing by more than 5 %. Initially 
driven  by  exports,  the  recovery  has  become  broad-based  and  is  now  anchored  on  domestic 
demand  and  spread  across  most  sectors.  Real  GDP  growth  surged  to  7.8  %  in  2015  and  is 
expected to ease in 2016 while remaining at robust rates. A number of sector- and company-
specific developments have led to an unprecedented surge in intellectual property investment 
through large imports of patents. Thanks to sustained job creation, the unemployment rate was 
below  9%  at  the  end  of  2015,  with  long-term  unemployment  also  trending  down.  Annual 
HICP inflation was zero in December 2015.  

The profitability of domestic banks improved further in 2015 but it still suffers from the high 
amount of impaired loans and the large stock of low-yielding loans. On the back of the strong 
economic recovery and active restructuring, the ratio of non-performing loans came down by 
more  than  seven  percentage  points  since  the  end  of  2013  but  the  stock  of  these  loans  still 
represented 20 % of GDP at the end of 2015. New lending increased somewhat in 2015 for 
the first time since the crisis though the stock of private sector credit continues to decline.  

Thanks  to the  strong economic  rebound, the general government deficit is expected  to have 
fallen  to  around  1.5  %  of  GDP  in  2015  from  3.9  %  in  2014,  despite  substantial  additional 
spending that was not initially budgeted. Tax revenues in 2015 were higher than expected, in 
particular  corporate  income  tax  receipts,  which  were  50  %  higher  than  in  2014.  Financing 
conditions  for  the  state  have  continued  to  improve.  Gross  public  debt  is  projected  to  have 
been below 100 % of GDP in 2015. Plans to sell government holdings in the domestic banks 
to  the  private  sector  are  expected  to  contribute  to  further  reductions  in  general  government 
debt. Longer-term projections indicate that public debt could fall to 78 % of GDP by 2026. 

22 

 
 
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: 2016 Winter Forecast, European Commission.

(**) Fitch upgraded its rating for the Irish sovereign in early 2016.

3.1.4.  Latvia 

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

(% of GDP)

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

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

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

2013

2014

2015

1.4
13.1
0.5

-5.7

89,182
3.1
11,953.0
1,187
0.3
n/a

1,010,420
563.1
n/a
n/a
n/a

29,079.0
28.3
2.9
32.6

5.2
11.3
0.3

-3.9

92,616
3.6
-9,046.0
1,439
0.3
n/a

1,104,755
584.4
n/a
n/a
n/a

29,368.0
28.3
2.7
31.7

7.8
9.4
0.0

-1.8 (*)

111,038
4.4
-966.0
2,024
0.4
n/a

1,214,723
566.0
n/a
n/a
n/a

29,586.4
29.1
2.4
26.6

Extended Fund Facility: XDR 19.5 billion drawn down
between 18 January 2011 and 18 December 2013 of which
XDR 7.65 billion repaid in December 2014, XDR 2.83 billion
repaid in February 2015 and XDR 5.2 billion repaid in March 2015

Baa3
BBB+
BBB+

Baa1
A
A-

Baa1
A+
A (**)

The Latvian economic growth improved from 2.4% in 2014 to estimated 2.7% in 2015. The 
growth outlook also remains favourable as bank lending and investments are set to increase 
and exporters have managed to overcome the negative shock from weaker demand in Russia. 
The country is also benefiting from low energy prices allowing households to increase savings 
and  consumption.  The  year-average  inflation,  as  measured  by  the  harmonised  index  of 
consumer prices (HICP), slowed from 0.7% in 2014 to 0.2% in 2015 reflecting the downward 
impact from energy imports. Based on the current assumption of commodity prices, inflation 
is projected to remain low in 2016 and to rebound more substantially to around 2% in 2017. 
The unemployment rate for the age group of 15-74 fell just below 10% in 2015 from 10.8% in 
2014 and is forecast to decline further to 8.6% in 2017. 

The  government  budget  balance  and  debt  indicators  have  moved  well  below  the  underlying 
benchmarks  of  the  EU  stability  and  growth  pact  over  the  past  years.  The  general  budget 
deficit  is  estimated  at  1.3%  of  GDP  in  2015,  decreasing  from  1.6%  in  2014,  as  economic 
growth and tax collection have exceeded expectations.  The general government debt dropped 
to  around  37%  of  GDP  in  2015  and  is  projected  to  remain  broadly  stable  over  the  medium 
run.    The  country's  adoption  of  the  euro  as  of  1  January  2014  and  subsequently  the  ECB 
monetary policy are contributing to a further reduction in Latvia's debt refinancing costs. At 

23 

 
 
 
2.7
9.8
0.3

-1.3

14,327.4
-1.9
495.0
5,130.00
4.2
Euro

34,970.3
143
n.a.
none
none

840.0
0.8
2.5
6.0

A3
A-
A-

the beginning of 2015, Latvia repaid EUR 1.2 billion under the EU financial assistance and 
successfully  completed  the  underlying  post-programme  surveillance.  Overall,  Latvia  has 
repaid a total of EUR 2.2 billion or 75% of its liabilities to the European Commission as of 
2015 while the next payment is due in 2019. In December 2015, the government successfully 
swapped  part  of  its  foreign  private  debt  reporting  interest  rate  savings  of  0.1%  of  GDP  for 
both 2016 and 2017. 

2013

2014

2015

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

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

(% of GDP)

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

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

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

3
11.3
-0.4

-0.9

13,710.4
-2.1
370.3
5,783.20
4.8
1.42

30,501.2
134
n.a.
none
none

3,200.0
3.1
10.5
23.3

2.4
10.2
0.2

-1.6

14,031.7
-2
232.8
4,490.20
3.7
Euro

33,541.6
142.2
n.a.
none
none

2,013.0
1.9
6.6
14.7

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)
Some numbers may differ from previous reporting due to revisions made by national authorities or release of final data replacing 

Baa2
BBB+
BBB+

Baa1
A-
A-

*

3.1.5.  Portugal 

The cyclical recovery of the Portuguese economy continued in 2015 mainly driven by robust 
domestic  demand  while  weaker  external  demand  remained  to  weigh  on  the  growth  outlook. 
Portugal's real GDP grew by 1.5% y-o-y and growth is projected to accelerate marginally to 
1.6% in 2016. Private consumption strengthened in 2015 on account of a significant drop in 
precautionary savings and favourable labour market developments. It is expected to continue 
growing robustly by around 2% in 2016 on the back of expansionary fiscal policy measures 
and  the  increase  in  the  minimum  wage.  Gross  fixed  capital  formation  took  a  hit  over  the 
second  half  of  2015,  but  the  strong  first  half  of  the  year  meant  that  investment  growth  was 
solid  in  2015.  Corporate  deleveraging  pressures  and  a  weaker  external  environment  are 
expected to limit investment expansion in 2016. Exports are forecast to grow broadly in line 
with foreign demand, but imports are expected to outbalance exports due to firms' domestic 
demand.  As  a  result,  the  contribution  of  net  trade  to  GDP  growth  is  forecast  to  remain 
negative.  The  labour  market  performance  continued  to  be  strong  in  2015:  employment 
increased  by  1.1%  and  the  unemployment  rate  declined  to  12.6%.  However,  labour  market 
performance is set to slow down over the medium term, thereby becoming more aligned with 
GDP  growth.  HICP  inflation  increased  to  0.5%  in  2015.  Consumer  prices  are  projected  to 

24 

 
 
 
increase only moderately in 2016, due to low external price pressures and persistent slack in 
the economy. Risks to the macroeconomic outlook are tilted to the downside, primarily due to 
the  high  indebtedness  levels.  In  addition,  policy  uncertainty  could  increase  risk  premia  and 
lead consumers to delay spending and businesses to postpone investments. 

Public finances benefitted from the recovery in 2015. The general government headline deficit 
is estimated to have reached 4.2% of GDP in 2015 (3.0% net of one-offs) down from 7.2% of 
GDP in 2014 (3.4% net of one-offs). The headline deficit was again impacted by a major one-
off operation related to the financial sector (i.e. the resolution of Banif worth 1.2% of GDP). 
Since the reduction of the headline deficit was based on cyclical factors rather than additional 
structural measures, the structural balance is estimated to have deteriorated by about 0.5% of 
GDP in 2015. The gross debt-to-GDP ratio is estimated to have decreased to 129.1% at the 
end of 2015, down from 130.2% at the end of 2014. The slight downward movement of the 
debt-to  GDP  ratio  is  projected  to  continue  in  2016,  supported  by  the  projected  economic 
recovery and primary budget surplus if fiscal discipline is maintained.   

The Portuguese banking system was shaken by the resolution applied to two of its systemic 
banks.  Against  the  backdrop  of  these  exceptional  measures  the  system  remained  stable  and 
trustworthy.  Banco  de  Portugal,  acting  in  its  supervisory  capacity,  announced  measures  to 
boost  the  banking  system’s  solvency  level.  However,  banks’  profitability  levels  remain 
subdued  and  non-performing  loans  continue  to  rise.  The  deleveraging  process  continued  to 
progress  in  2015  and  both  corporate  and  household  indebtedness  contributed  to  the  overall 
debt reduction.  

The  yields  for  10-year  Portuguese  government  bonds  increased  considerably  above  3.0%  in 
early  February  2016,  partly  due  to  policy  uncertainties.  This  resulted  in  widening  the 
sovereign risk premia with respect to the German bund but also against Italian and Spanish 
sovereigns. 

25 

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

(% of GDP)

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

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

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

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 2015)
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*****

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

2013

2014

2015

-1.1
16.4
0.4

-4.8

68,500.0
1.4
1.5
12.7
2.3
EUR

385,500.0
226.4
44.9
na
none

29,451.0
28.6
7.6
43.0

0.9
14.1
-0.2

-7.2

71,000.0
0.6
4.6
16.2
2.8
EUR

408,436.0
235.5
0.0
na
none

31,427.0
30.3
7.7
44.3

1.5*
12.6**
0.5

-4.2**

74,100**
na
na
na
na
EUR

40,8700**
228.4**
na
na
none

30,742.0
30.2
7.5
41.5

EFF

EFF

On track

Completed

Ba3
BB
BB+
BBB-low 

Ba1
BB
BB+
BBB-low 

Ba1
BB+
BB+
BBB-low 

Notes:
* Quarterly National Accounts - Flash Estimate by the National Statistical Office. 
** European Commission 2016 winter forecast, European Commission estimates.
*** The European Commission 2016 winter forecast estimates the current account balance but in national terms. The current account balance as 
% of GDP in national account terms was 0.3% of GDP in 2014 and it is projected to have reached 0.7% of GDP in 2015.
**** Debt service is defined as interests on public debt.
***** The Portuguese Government received the approval from the Eurogroup and ECOFIN to early repay about half of the IMF outstanding credit 
under the financial assistance programme. Consequently, EUR 8.4 bn of IMF loans were redeemed in 2015. 

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

3.1.6.  Romania 

Romania's GDP grew by 3.5% in 2013 and 3% in 2014 and is estimated to have increased by 
3.7%  in  2015  on  the  back  of  (i)  a  fiscal  stimulus  driving  private  consumption,  and  (ii) 
substantial  recovery  in  investment.  Growth  is  forecast  to  accelerate  to  4.2%  in  2016  in 
response  to  an  additional  fiscal  stimulus  of  more  than  1½%  of  GDP.  In  2017,  real  GDP 
growth  is  projected  to  moderate  to  3.7%.  With  growth  above  potential,  the  output  gap  is 
expected to close in 2016 and to become positive in 2017. 

Despite  robust  economic  growth,  the  headline  deficit  is  forecast  to  increase  from  1.1%  of 
GDP in 2015 to 3.0% of GDP in 2016 and 3.8% of GDP in 2017. This deterioration mainly 
reflects  unfunded  tax  cuts  and  expenditure-increasing  measures,  such  as  the  public-sector 
wage increases adopted in the end of 2015 with major impact in 2016. 

Romania  reached  its  MTO  of  a  deficit  of  1%  of  GDP  in  structural  terms  in  2014,  one  year 
earlier than planned. Despite the slight deterioration in 2015, the structural deficit is estimated 

26 

 
 
 
to have reached 1% of GDP and thus to have remained at the MTO. The fiscal expansion in 
2016 and 2017 corresponds to a deviation from the MTO estimated at 2% of GDP in 2016 and 
3  %  of  GDP  in  2017,  assuming  no  further  policy  changes  are  made.  The  public  debt  is 
expected to gradually rise above 40% of GDP by 2017. 

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)
(%)
(%)

2013

2014

2015*

3.4
7.2
1.3

-3.0

57,338.8
-1.2
-2.9
35,434.5
6.8
4.47

98,068.9
68.0
7.4
none
none

7,466.0
7.3
7.6
15.5

2.9
6.6
1.0

-2.2

61,701.4
-0.5
-2.7
35,505.7
6.4
4.48

94,744.3
63.1
10.2
none
none

7,122.0
6.9
7.3
12.4

2.7
6.8
-0.7

-1.8

66,218.9
-0.9
-2.8
35,485.1
5.9
4.52

90,896.4
57.4
10.4
none
none

5,241.0
5.2
5.5
8.5

Stand-by arrangement
2009-2011
Drawn amount of SDR 10.6 bn, 0.1 bn to be repaid
Precautionary Standby arrangement
2011-2013
Available amount of SDR 3.1 bn not drawn
Precautionary Standby arrangement
2013-2015
Available amount of SDR 1.75 bn not drawn

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 2016 Winter Forecast
**  Debt service is based on the fiscal (long term public debt service)

Baa3
BB+
BBB-

Baa3
BB+
BBB-

Baa3
BB+
BBB-

3.2.  Candidate countries 

3.2.1.  Former Yugoslav Republic of Macedonia 

The economic recovery continued in 2015, driven by a surge in private consumption and by 
robust  export  growth.  Annual  GDP  growth  accelerated  to  an  estimated  3.7%.  Private 
consumption increased by 3.2% y-o-y, underpinned by further gains in employment and rising 
real net wages, as well as increases in pensions, and robust credit growth. Exports increased 
further in 2015, driven by manufacturing production by foreign companies established in the 

27 

 
 
                  
                
                
 
 
country, although expansion came at a slower pace than in 2014. Growth of imports, too, was 
more subdued, partly because import-intensive investment activity remained flat. 

External  vulnerabilities  remained  contained  in  2015.  The  current  account  deficit  widened, 
mainly on account of a larger primary income deficit, but it is still at a moderate level (1.4%). 
The  merchandise  trade  deficit  narrowed  somewhat,  yet  it  remains  structurally  elevated  at 
around 20% of GDP. The goods and services deficit is fully covered by private transfers from 
abroad, which amounted to some 19% of estimated GDP. Net FDI inflows were some 23.5% 
below  their  pre-year  levels  in  2015,  amounting  to  some  1.7%  of  estimated  GDP,  yet  fully 
covering the deficit in the current account. Foreign exchange reserves were lower at year-end 
than  one  year  earlier,  but  still  covered  well  over  5  months  of  projected  imports.  Early 
repayment of outstanding IMF loans, a reduction in external private sector debt, repayment of 
a  150mn  Eurobond,  and  the  launch  of  a  280mn  Eurobond  were  the  main  factors  driving 
external debt levels in the first three quarters of 2015. In terms of GDP, external debt stood at 
65.4% at the end of the third quarter; lower  by over 5pp compared to the same time a year 
earlier. 

Fiscal discipline slipped again in 2015 despite revenue over-performance in the first half of 
the  year  on  account  of  changes  in  profit  taxation.  The  government  was  required,  as  in 
previous years, to resort to a supplementary budget in mid-year, increasing ad hoc spending 
on  transfer  payments,  public  wages  and  pensions,  and  raising  the  deficit  target  by  0.2pp  to 
3.5% of projected GDP (which was met in the year-end outturn, based on first GDP estimate 
by  the  Statistical  Office).  General  government  debt  levels  rose  further  in  2015,  mainly  on 
account of the government's Eurobond issue (280mn, used in part for repayment of previous 
Eurobond)  in  November,  declining  slightly  as  a  share  of  GDP  compared  to  end-2014,  to 
37.9%.  Overall  public  debt  levels  stood  at  46.5%  of  GDP  at  end-2015,  only  slightly  higher 
than  at  end-2014,  but  about  6pp  higher  than  at  end-2013,  as  an  increasing  share  of  public 
infrastructure investment is carried out by state-owned companies, whose debt is for the most 
part guaranteed by the government. 

28 

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

2013

2014

2015

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

(% of GDP)

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

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

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

2.9
29.0
2.8

-3.9

3,529.7
-1.6
229.4
1,993.0
5.6
61.58

5,219.7
64.0
18.8
none
none

194.0
0.2
3.7
5.5

3.5
28.0
-0.3

-4.2

4,057.0
-0.8
197.4
2,436.5
6.3
61.62

5,992.3
70.6
N.A.
none
none

160.0
0.2
2.7
3.9

3,7e
26.0
-0.3f

-3.8f

4,41907
-1.4
157.0
2,261.7
5.5
61.61

6,231.5 (Q3)
65.4
N.A.
none
none

160.0
0.2
2.6
0.0

none

none

none

(post-program 
monitoring)

(post-program 
monitoring)

none
BB-

BB+

none
BB-

BB+

none
BB-

BB+

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 Winter 2016 Forecast.
e - ECFIN estimation.

3.2.2.  Montenegro 

Robust growth close to 4% was supported by large infrastructure projects. While 2014 was 
marked by deflationary trends, 2015 showed a gradual recovery in the inflation trend, with the 
average index of consumer price expanding by 1.4% despite further contraction of oil prices. 
In the third quarter of 2015, employment increased by 3% y-o-y. However, employment gains 
were  offset  by  further  increase  in  the  labour  force,  resulting  in  the  stagnation  of  the 
unemployment rate at 16.5% over the year. 

External  imbalances  remain  significant  and  the  trade  balance  deteriorated  further. 
However, preliminary estimates for 2015 points to gradual narrowing of the current account 
deficit  to 13% of GDP compared to 15%  a year earlier as a result of strong tourism-related 
inflows. The deficit is being financed by also strong FDI inflows, totalling some 17% of GDP, 
mostly  in  the  corporate  and  financial  sectors.  No  reliable  statistics  are  available  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.  

29 

 
 
 
The central government budget deficit surged to 7.8% of GDP in 2015. Yet, while budget 
revenue remained broadly in line with the plan, expenditures rose due to significant (6.4% of 
GDP) spending on a highway as well as unplanned repayment of arrears. In September 2015, 
the public debt stood  at  59%  of  GDP, 85% of which  account for external debt.  On  18 May 
2015, Moody's affirmed Montenegro's government bond rating at Ba3 with negative outlook, 
reflecting the country's deteriorating debt metrics albeit mitigated by high debt affordability. 
On  13  November  2015,  Standard  &  Poor's  affirmed Montenegro's long-term and  short-term 
(B+/B)  ratings  with  stable  outlook,  on  strong  economic  growth  supported  by  increased 
investment  activity,  but  constrained  by  low  income  level,  high  external  debt  and  lack  of 
monetary policy flexibility.  

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

(% of GDP)

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

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

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

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)

* Ratio of 12 months imports of goods moving average.
** flow up to and in including Q3.

f - Commission Winter 2016 Forecast.

3.2.3. 

Serbia 

2013

2014

2015

3.5
19.5
1.8

-5.2

1,390.1
-14.5
323.9
423.7
2.9
1.00

4,281.8
128.7
5.1
none
none

218.4
<0.1
5.1
15.7

1.8
18.0
-0.5

-3.1

1,388.1
-15.2
353.9
544.7
3.7
1.00

4,501.3
132.9
5.7
none
none

244.8
<0.1
5.4
17.6

3.9f
17.6f
1.4

-7.0f

1 284.0 Q3
-12.6 Q3
526.4 Q3
694.5 Nov
4.5 Nov
1.00

4,933.5
137.5
6.4
none
none

251.3
<0.1
5.1
19.6

none

none

none

Ba3
BB-
none

Ba3
B+
none

Ba3
B+
none

The  economy  recovered  in  2015,  following  a  recession  a  year  before.  Low  international 
primary commodities prices in combination with stronger investments have supported growth, 
estimated  at  0.8%  in  2015.  Robust  exports  together  with  higher  inflows  from  remittances 
contributed  to  narrowing  external  imbalances.  The  current  account  deficit  shrunk  further  to 
around  4.8%  of  GDP,  while  net  FDI  inflows  grew  strongly  by  45.6%  y-o-y  to  EUR 1.8 
billion, covering 113% of the current account deficit. Inflation has remained low and below 

30 

 
 
 
the central bank target tolerance band, averaging 1.4% in 2015. Continued price stability and 
fiscal consolidation have facilitated further monetary policy easing – the National Bank cut its 
key policy rate from 8% in the beginning of 2015 to 4.5% in October.  

The  consolidated  budget  deficit  fell  to  3.8%  of  GDP  in  2015,  supported  by  a  set  of 
consolidation measures, in particular pension and wage cuts. The lower than initially expected 
deficit  mainly  resulted  from  of  over-performance  on  the  revenue  side.  Following  this 
impressive consolidation, prospects for the deficit are to remain broadly unchanged in 2016, 
before declining slightly in 2017. Government debt continued increasing in 2015, standing at 
around 76% of GDP by the end of the year. 

The  dinar  had  remained  broadly  stable  against  the  euro  throughout  most  of  the  year.  In 
order  to  ease  excessive  daily  volatility  of  the  exchange  rate,  however,  the  central  bank 
remained  active,  intervening  on  both  sides  of  the  market  buying  a  net  EUR  520  million. 
Improved  balance  of  payments  flows  have  supported  a  high  level  of  central  bank  foreign 
exchange  reserves,  which  stood  at  EUR  10.4  billion  by  the  end  of  the  year,  covering  over 
seven months’ worth of imports of goods and services. The 36-month precautionary Stand-By 
Arrangement  with  the  IMF  has  remained  on  track  and  the  Executive  Board  of  the  IMF 
completed the third review in December. There were no changes in Serbia's sovereign rating 
in  2015,  although  in  December  Fitch  Ratings  raised  Serbia's  outlook  to  ''positive''  from 
''stable''. 

31 

 
 
(%)
(% 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 (average)
Inflation rate (CPI) (average)

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 Winter 2016 Forecast.
e - ECFIN estimation.

3.2.4.  Turkey 

2013

2014

2015

2.6
22.1
7.8

-5.5

13,937.0
-6.1
1,298.1
11,188.8
9.2
114.64

25,738.0
75.1
N.A.
none
none

2,173.6
2.1
8.4
15.6

-1.8
19.4
2.1

-6.6

14,450.7
-6.0
1,236.3
9,907.2
8.0
120.96

25,741.2
77.2
N.A.
none
none

2,060.2
2.0
8.0
14.3

0.8
17.9
1.4

-3.8

15,617.8
-4.8
1,800.2
10 376.5
7.7
121.63

26 292.0 Q3
79.9e
N.A.
none
none

2,047.9
2.0
7.8
13.1

none

none

SBA 
(precautionary)
Feb-15
On track

B1
BB-

B+

B1
BB-

B+

B1
BB-

B+

The Turkish economy expanded 3.4% on a year-on-year basis in the first three quarters of 
2015. There was a pronounced shift towards domestic-demand driven growth with consumer 
spending increasing by 4.5%, supported by the lower oil price and easy financial conditions. 
Private investment mustered 4.3% growth after having been close to stagnation for two years. 
In  contrast  to  the  preceding  year,  net  exports  exerted  a  drag  on  growth  as  export  volumes 
contracted while import volumes expanded. For the fourth quarter of 2015, the data suggest 
that final demand continued expanding at a moderate pace. Inventory adjustment, however, is 
expected to have exerted a significant drag on growth, resulting in an estimated GDP growth 
of  3.1%  for  the  year  as  a  whole  in  the  Commission's  forecast  from  February  2016. 
Employment expanded 2.5% in 2015, but the labour force grew even faster, resulting in rising 
unemployment. 

Inflationary  pressures  remained  unabated  in  the  context  of  a  depreciating  currency  and 
sharp rises in food prices which more than offset the disinflationary impact of the lower oil 

32 

 
 
 
 
price.  End-of-year inflation was 0.6 percentage points higher at 8.8%, which was above the 
official  5%  target  for  the  fifth  consecutive  year.  Nevertheless,  the  central  bank  eased 
monetary policy in early 2015 and then kept its main policy rate unchanged at 7.5% until the 
end  of  the  year.  The  current  account  deficit  narrowed  to  EUR  28.9  billion  in  2015, 
corresponding to an estimated 4.5% of GDP. The narrowing of the current account deficit by 
1 percentage point of GDP compared to the preceding year is almost fully explained by the 
lower bill for imported energy. The central government recorded a budget deficit of 1.2% of 
GDP  in  2015,  a  reduction  of  0.1  percentage  point  compared  to  the  preceding  year.  General 
government debt as a ratio of GDP has declined from 46% in 2009 to around 33% at the end 
of 2015. 

Country-risk indicators : Turkey
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

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 - Commission Winter 2016 Forecast.

3.3. 

Potential candidate countries  

3.3.1.  Albania 

2013

2014

2015

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

(% of GDP)

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

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

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

4.2
8.9
7.4

-1.3

157,716
-7.7
6,594
95,015
6.1
2.96

282,107
47.2
n.a.
none
none

9252.7
9.0
3.3
5.9

2.9
10.1
8.2

-1.5

166,889
-5.5
4,118
104,858
6.9
2.83

331,506
50.4
n.a.
none
none

9184.9
8.9
2.8
5.5

3.1f
10.5
8.8

-1.4f

178,749
-4.5
10,514
101,788
-
3.18

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

9263.2
9.1
n.a.
5.2

none

none

none

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

BBB- /stable

Economic growth has been on an upward  trajectory. GDP growth accelerated  from 2% in 
2014  to  2.7%  y-o-y  in  the  first three  quarters  of  2015,  driven  by  a  surge  in  investment  and 
positive contribution from net exports. Private consumption recorded a contraction in the first 

33 

 
 
 
half of 2015 mainly as a result of precautionary saving behaviour by households, but it turned 
to  growth  in  the  third  quarter.  Reflecting  still  below-potential  economic  activity,  the  annual 
rate of inflation averaged 1.9% in 2015, undershooting the Bank of Albania’s (BoA) target of 
3% for the fourth consecutive year. In response to weak inflation, BoA stepped up monetary 
easing by cutting its policy rate to a new historic low of 1.75% in November. However, the 
pass-through of monetary stimulus continues to be hampered by weak lending from banks that 
have  become  risk-averse  amid  a  falling  but  still  very  high  (around  18%)  share  of  non-
performing loans (NPLs). 

The  current  account  deficit  is  estimated  to  have  narrowed  in  2015  as  higher  household 
precautionary  saving  offset  a  pick-up  in  investment,  improving  the  domestic  saving-
investment balance. In the four quarters to September, the current account deficit amounted to 
10.9% of GDP, down from 12.5% in the same period a year earlier. Net FDI inflows remained 
the  main  source  of  external  financing.  Favourable  balance-of-payment  flows  resulted  in  an 
increase  in  official  foreign  reserves  which  stood  at  EUR  2.49  billion  in  the  third  quarter, 
covering 7.7 months of imports. The stock of gross external debt, mainly composed of long-
term  debt  owed  by  the  government,  stood  at  72.8%  of  projected  full-year  GDP.  Albania's 
three-year EUR 330 million IMF loan arrangement, concluded in February 2014, remained on 
track. 

In  2015,  budget  revenues  underperformed  even  relative  to  the  reduced  target  set  in  July. 
The  4.3%  shortfall  was  mainly  caused  by  overoptimistic  assumptions  about  nominal  GDP 
growth and collection efficiency gains. At the same time, expenditure remained 7.7% below 
the  initial  plan  mainly  due  to  savings  in  interest  costs  and  the  underspending  of  capital 
budgets.  All  in  all,  the  headline  deficit  overachieved  the  4%  target  and  declined  to  3.8%  of 
GDP from 5.1% recorded a year earlier. Public debt (including guarantees) stood at 72.2% of 
GDP at the end of 2015. 

34 

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

(% of GDP)

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

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

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

Country-risk indicators : Albania
Output and prices

Real GDP growth rate
Unemployment (average)
Inflation rate (CPI) (average)

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.
e - ECFIN estimation.

f - Commission Winter 2016 Forecast.

3.3.2.  Bosnia and Herzegovina 

2013

2014

2015

1.1
16.4
1.9

-5.0

2,765.5
-10.8
923.2
1,955.7
6.4
140.26

6,368.2
66.1
N.A.
none
none

301.0
<0.1
4.7
10.9

2.0
17.9
1.6

-5.1

2,813.1
-13.0
811.5
2,084.8
6.3
140.14

6,927.5
69.3
N.A.
none
none

294.0
<0.1
4.2
10.5

2.7f
17.5f
1.9

-3.8

2,071.4
-10.9f
705.4 Q3
2 490.6 Oct
7.7 Oct
139.74

7,475.8 Q3
72.8 Q3
N.A.
none
none

285.0
<0.1
3.8
13.8

none

B1
B
none

EFF
28-Feb-14
on track

EFF
28-Feb-14
on track

B1
B
none

B1
B+
none

Economic activity rebounded in 2015, after flood-related damages had kept output growth 
at a low level in 2014. During the first 3 quarters of 2015, GDP was 3.2% higher than a year 
before,  largely  driven  by  stronger  private  consumption,  investment,  but  also  exports.  After 
nearly  4  weak  quarters,  agriculture  and  mining  appear  to  have  registered  positive  growth 
again.    The  stronger  output  growth  supported  an  increase  in  employment  by  1.5%  in  2015. 
However, the unemployment rate remained high, at 43.2% on average in 2015, compared to 
43.6% a year before. The general price level continued to decline during 2015, with overall 
consumer prices being 1% lower than a year before. However, the decline in the overall price 
level  is  mainly  driven  by  prices  for  imported  energy  and  food,  while  price  increases  for 
housing  and  education  rose  by  some  1-2%.  In  line  with  low  inflation,  wage  increases  have 
remained moderate, largely unchanged in nominal terms, and some 1% higher in real terms.  

External  accounts  benefit  from  lower  import  prices,  while  export  levels  remained  largely 
unchanged.  As  a  result,  the  trade  deficit  during  the  four  quarters  to  September  declined 
slightly, dropping to -27.8% of GDP, compared to -28.6% of GDP a year before. The current 
account  registered  a  similar  dynamics  during  the  same  period.  In  the  four  quarters  to 
September, its deficit narrowed to 6.5% of GDP, compared to 6.9% a quarter before. On the 

35 

 
 
 
financing side, net FDI inflows dropped to 1.2% of GDP in the third quarter, bringing average 
net FDI inflows in the four quarters to September to 1.6% of GDP. Foreign reserves continued 
to  improve,  benefitting  from  a  somewhat  stronger  increase  in  foreign  exchange  inflows  and 
moderate  growth  of  import  spending.  This  brought  reserve  levels  to  nearly  7  months  of 
imports.  External  debt  increased  to  54.6%  at  the  end  of  2015,  largely  reflecting  externally 
financed  additional  spending  related  to  the  repair  of  the  2014  flood  damages.  Public  debt 
stood at some 42.4% of GDP at the end of the third quarter of 2015. 

The fiscal deficit remained under control in 2015, amid marked changes to the composition 
of  spending  and  a  substantial  change  in  the  financing.  Public  expenditures  in  2015 
remained  broadly  unchanged  at  42.6%  of  GDP  and  were  heavily  biased  towards  current 
expenditures.  The  slight  improvement  of  expenditure  composition  which  started  in  2013 
seems to have been partly offset by pressures on current spending. Increases in spending for 
transfers  led  to  cuts  in  expenditure  for  goods  and  services  but  also  public  investment. 
Available  data  suggest  that  consolidated  fiscal  revenues  remained  broadly  unchanged  from 
the previous year at 41.3% of GDP. Due to disagreements on the implementation of requested 
reforms, previously expected external financing from IMF and World Bank had to be replaced 
by  spending  cuts  and  by  largely  domestic  sources  of  finance.  The  2016  budgets  envisage  a 
consolidated,  country-wide  deficit  of  1.2%  of  GDP.  However,  the  financing  of  the 
expenditure  plans  partly  relies  on  external  support  from  the  IMF  and  World  Bank,  which 
however is not yet secured. Discussions with those institutions are ongoing.  

Country-risk indicators : Bosnia and Herzegovina
Output and prices

2013

2014

2015

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 including Q3.

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

(% of GDP)

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

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

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

36 

2.4
44.5
-0.1

-2.1

3,974.4
-5.5
195.6
3,614.0
5.6
1.96

8,327.1
52.2
11.9
none
none

1,025.0
1.0
12.3
25.8

1.4
43.6
-0.9

-2.0

4,310.6
-7.8
365.7
4,001.2
5.8
1.96

7,965.5
51.9
14.2
none
none

1,111.0
1.1
13.9
25.8

3.1 Q3
43.2
-1.0

N.A.

3 727.3 Q3
-6.1 Q3
159.6
4 411.5 Nov
6.5 Nov
1.96

8,190.0
54.6
15.8
none
none

1,058.0
1.0
12.9
28.4

SBA
26-Sep-12
on-track

SBA
26-Sep-12
on-track

SBA
26-Sep-12
expired

B3
B
none

B3
B
none

 
 
 
3.4. 

ENP countries  

3.4.1.  Armenia 

Armenia's  economic  environment  deteriorated  in  late  2014  and  2015,  as  a  result  of  weaker 
external conditions. Whilst since mid-2015 the situation has broadly stabilised, vulnerabilities 
persist and the outlook remains challenging.  

Real  GDP  growth  slowed  down  from  3.4%  in  2014  to  2.2%  in  2015,  as  a  result  of  a  sharp 
decline  in  remittances  and  export  revenues.  Whilst  the  economy  registered  relatively  high 
growth in the first half of the year (4.1% y-o-y), this was largely the result of one-off factors. 
Domestic demand remains constrained by reduced remittances, and unemployment continues 
to be high, closing 2015 at 16.6%. As a result, sluggish growth is likely to persist in 2016, and 
pick up gradually thereafter, in line with recovery in Russia. 

Average inflation increased from 2.8% in 2014 to 3.2% in 2015: inflationary pressures picked 
up in the first half of 2015 owing to the depreciation of the dram, and subsequently eased in 
the second half of the year. Public finances remain generally sound, although 2015 witnessed 
a  somewhat  looser  fiscal  policy  aimed  at  supporting  domestic  demand  amid  tightened 
monetary  policy.  Fiscal  deficit  increased  from  2.1%  to  3.9%  of  GDP  in  2015;  however, 
greater restraint is expected to set as of 2016, in line with IMF advice. Armenia's public debt 
increased to 48.2% of GDP in 2015, from 43.1% in 2014; over 88% of the debt is in external 
liabilities denominated in foreign currency. The total external debt to GDP ratio increased to 
80.5% of GDP at year-end 2015 from 71% one year before. 

The  external  sector  is  gradually  adjusting,  although  it  remains  fragile.  Armenia's  current 
account deficit eased in 2015 (-4.9% of GDP, from -7.3% in 2014) with the depreciation of 
the  dram  and  the  fall  of  remittances  leading  to  a  steep  decline  in  imports  and  a  significant 
narrowing of the trade deficit. Following sharp depreciation pressures at the end of 2014, the 
exchange  rate  stabilised  in  2015  amid  tight  monetary  conditions  and  central  bank 
interventions in the beginning of the year. Gross international reserves were on a downward 
path  in  early  2015,  but  subsequently  increased  in  the  second  half  of  the  year  to  reach  4.4 
months of imports by the end of 2015. 

The  second  review  of  the  IMF  programme  was  completed  on  6  November  2015,  which 
enabled  the  release  of  additional  SDR  11.74  million,  bringing  total  disbursement  under  the 
arrangement to SDR 35.22 million (about USD 48.9 million).  

37 

 
 
Country-risk indicators : Armenia
Output and prices

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

Public finances

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

General government balance

(% of GDP)

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)

(m EUR)
(% of GDP)
(m EUR)
(m EUR)
(months)
(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: Extended Fund Facility (EFF)

Date

On track

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

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

2013

2014

2015*

3.5
18.5
5.6

-1.0

1,919.8
-7.6
370.2
1,645.2
4.9
554.7

6,244.3
78.7
28
none
none

122.0
0.1
2.0
6.4

3.4
18.0
2.8

-2.1

1,885.8
-7.3
356.1
1,367.9
3.9
565.1

7,835.0
71.0
8.4
none
none

149.0
0.1
1.9
7.9

2.2
16.6
3.2

-3.9

1,488.6
-4.9
306.5
1,626.2
4.4
528.7

7,988.4
80.5
5.8
none
none

245.6
0.2
3.1
16.5

EFF/ECF
June 2010 - June 
2013
On track

EFF
February 2014 - 
April 2017
On track

EFF
February 2014 - 
April 2017
On track

Indicators of market's perception of creditworthiness

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

Ba2
none
BB-

Ba3
none
B+

Ba3
none
B+

* Numbers for 2015 are estimates
Sources: Central Bank of Armenia, National Statistical Service of Armenia, Commission, IMF, Moody's, Fitch

3.4.2.  Ukraine 

In 2015, Ukraine's recession deepened. The decline in real GDP reached an estimated 10% in 
real  terms  from  6.8%  a  year  earlier.  The  double-digit  drop  in  output  was  fuelled  by  weak 
consumer confidence and loss of productive capacity as a result of the conflict in the east. As 
this conflict subsided and substantial international financial support had been made available, 
Ukraine's  economy  witnessed  signs  of  economic  stabilisation  in  the  second  half  of  the  year 
with  the  pace  of  economic  contraction  slowing  down  to  1.2%  in  annual  terms  in  the  final 
quarter of the year from 17.2% in the first quarter.  

An  acute  currency  crisis  in  early  2015,  coupled  with  sharp  increases  of  gas  and  electricity 
tariffs, pushed CPI inflation up to more than 60% year-on-year in April. Absent demand-side 
pressures and thanks to relative stability on the foreign exchange market that was underpinned 
by  reinforced  currency  controls  and  strong  monetary  policy  tightening  by  the  central  bank, 
inflation moderated to 43.3% year-on-year at the end of 2015 and further eased in early 2016. 
The environment of high inflation was supportive of budget revenue growth in nominal terms 
and, coupled with conservative expenditure policies, contributed to a significant reduction of 

38 

 
 
 
the budget deficit to an estimated 2.2% of GDP in 2015 from 4.5% a year earlier. In addition, 
the  operational  deficit  of  the  state-owned  gas  company  Naftogaz  was  significantly  reduced. 
Despite  fiscal  consolidation,  public  debt  rose  by  approximately  10  percentage  points  on  the 
year  to  an  estimated  80%  of  GDP  at  end-2015  as  a  result  of  the  ongoing  currency 
depreciation. 

Ukraine's external adjustment continued in 2015 and the deficit on the current account went 
down  to  0.2%  of  GDP  from  3.5%  a  year  earlier  as  a  result  of  a  sharp  import  contraction, 
which outpaced the parallel decline in exports (in terms of both volume and prices). The pace 
of private capital outflows slowed over the course of the year as macroeconomic stabilisation 
started  taking  hold.  Meanwhile,  official  assistance  flows  have  enabled  Ukraine  to  replenish 
the stock of gross international reserves – to USD 13.3 billion at the end 2015 from USD 7.5 
billion  a  year  earlier.11  As  part  of  the  IMF  programme,  Ukraine  reached  an  agreement  with 
external  private  creditors  over  the  restructuring  of  USD  19  billion  of  debt.  Apart  from 
maturity extension, the deal resulted in debt relief of around USD 3 billion. In the meantime, 
the country did not reach an agreement over the restructuring  of  a  USD  3  billion  Eurobond 
held by Russia and defaulted on this instrument on its maturity in December 2015. 

The  confidence-driven  recession  and  currency  depreciation  remained  a  drag  on  the  banking 
sector in 2015. In an environment of weak demand and ongoing deleveraging, lending activity 
remained  subdued  throughout  the  year.  While  deposits  were  negatively  hit  by  the  currency 
crisis in early 2015, a significant recovery was witnessed afterwards. With a growing need for 
loan-loss provisions (the share of non-performing loans of operational banks rose to 28% at 
end-2015),  the  loss  of  the  banking  sector  widened  further  in  2015,  to  UAH  66  billion  from 
UAH  53  billion  a  year  earlier.  In  its  attempts  to  further  stabilise  the  banking  sector,  the 
National Bank of Ukraine (NBU) continued the clean-up of unviable banks, initiated another 
round  of  stress  tests  to  identify  capital  needs  for  the  biggest  lenders  and  launched  a 
comprehensive programme to address the issue of related-party lending. 

11  In  2015,  Ukraine  received  more  than  USD  10  billion  of  official  financial  support,  out  of  which  the  IMF 
accounted  for  the  lion's  share  with  USD  6.5  billion  of  assistance.  The other  major  creditors  were  the 
EU, the US and the World Bank, with each of them extending around USD 1 billion of support. 

39 

 
 
                                                 
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

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)

2013

2014

2015

0.0
7.3
0.5

-4.8

61,531
-9.0
3,071
14,804
3.5
11.0

103,023
77.5
72.6
none
none

549.0
0.5
0.5
0.9

-6.8
9.3
24.9

-4.5

49,256
-3.5
225
6,205
1.9
19.2

104,034
95.1
83.6
none
none

2,436.0
2.3
2.3
4.9

-10.0*
9.6*
43.3

-2.2

42,700
-0.2
2,755
12,216
3*
26.2

113897*
138.5*
106.5*
yes
yes

3,422.0
3.4
3.0
8.0

none

Caa1
B-
B-

SBA 17.0bn USD

EFF 17.5bn USD

Apr 2014 - Mar 2016 Mar 2015 - Dec-2018

Caa3
CCC-
CCC

on track

Caa3
B-
CCC

* EC staff estimate
**does not include the deficit of state-owned Naftogaz (1.9% in 2013, 5.6% in 2014)

3.5.  Mediterranean partners 

3.5.1.  Egypt 

Following  a  protracted  period  of  political  instability  since  the  revolution  in  January  2011, 
which  had  a  strongly  negative  effect  on  the  economy,  Egypt  seems  to  have  turned  a  corner 
following the election of President al-Sisi in May 2014 and renewed efforts to push forward 
with fiscal consolidation and key economic reforms (notably of the price subsidy system) and 
to  support  investment,  including  by  attracting  foreign  investors.  A  major  Economic 
Development Conference that took place in March 2015, as well as the successful conclusion 
of the first phase of the Suez Canal Expansion in August 2015, was important in terms of the 
international  recognition  of  this  economic  turnaround.  Nevertheless,  following  recent 
developments,  concerns  are  growing  over  Egypt's  persistent  internal  and  external  economic 
imbalances.  

The  negative  effects  on  tourism  (accounting  for  over  11%  of  GDP  and  a  large  generator  of 
foreign currency) following the Russian plane crash of 31 October are expected to exacerbate 
a  vulnerable  situation.  Pressures  are  growing  to  secure  sources  of  financing  to  fund  a 
persistently  high  fiscal  deficit  (11.7%  of  GDP  in  FY14/15)  and  the  large  public  investment 
drive  underpinning  Egypt's  recent  positive  GDP  growth  (4.2%  in  FY14/15).  The  current 
account deficit has worsened from -0.8% of GDP in FY13/14 to -3.7% of GDP in FY14/15.  

40 

 
 
 
The foreign reserve levels remain very vulnerable (at barely 3 months of imports) and more so 
following  recent  large  interventions  by  the  central  bank  to  clear  backlogs  in  demand  for 
dollars  from  importers.  By  contrast,  external  debt  remains  low,  accounting  for  only  15%  of 
GDP.  The  large  inflows  of  grant  and  concessional  funding  from  GCC  countries  during 
FY13/14  have  significantly  diminished,  and  Egypt  has  obtained  budget  support  loans  of 
around USD 3.5 billion from the World Bank and the African Development Bank, as well as 
planned  new  possible  Eurobond  issuances,  in  order  to  diversify  its  financing  sources. 
Relations with the IMF have improved, with the first Article IV Consultation in over 4 years 
being  completed  in  January  2015,  and  recent  developments  suggest  that  the  Egyptian 
authorities  could  envisage  seeking  a  financial  arrangement  with  the  IMF  in  the  short-term. 
Egypt's sovereign credit ratings have slightly improved since 2013: S&P from CCC+ to B-; 
Fitch from B- to B, and; Moody's from Caa1 to B3. 

Monetary policy tries to balance its support of the growth momentum with the containment of 
inflationary pressures. While inflation has been on a downward trend since mid-2014, partly 
reflecting the decline in international energy prices, the depreciation of the currency and fiscal 
reforms  risks  pushing  it  up  again.  The  unemployment  rate  remains  at  high  levels,  closing 
2015 at over 13%, up from 9% prior to the 2011 revolution. Total government debt continued 
to increase in FY14/15, reaching 90% of GDP, up from 76% of GDP in FY10/11. The mid-
term  objective  announced  by  the  government  is  to  reduce  the  figure  to  between  80-85%  of 
GDP  within  five  years.  Gross  public  financing  requirements  (stemming  from  the  need  to 
cover  the  deficit  and  debt  amortizations)  are  large  (around  50%  of  GDP)  and  the  average 
maturity of public debt is short (around 2 years).  

41 

 
 
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

2013

2014

2015

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

2.1
13.0
9.8

2.2
13.4
8.2

4.2
12.8
11.4

(% of GDP)

-14.1

-13.6

-11.7

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)
(%)
(%)

37,519.1
-2.4
2,756.5
11,102.6
2.5
9.2

33,078.1
15.9
5.7
none
none

2,087.0
2.0
6.3
5.6

31,871.3
-0.8
2,777.8
11,915.2
2.8
9.8

33,698.8
16.1
6.6
none
none

2,240.0
2.2
6.6
7.0

37,979.6
-3.7
6,224.7
16,689.4
3.1
8.5

44,565.1
15.5
21.6
none
none

2,274.0
2.2
5.1
6.0

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)

Caa1
CCC+
B-

Caa1
B-
B

B3/stable
B-/stable
B/stable

(1)  Fiscal year ends 30th June

* Sources: IMF, Ministry of Finance, Central Bank of Egypt, EIU
** The Government withthdrew its request for an IMF programme in mid 2011. Discussions were renewed in early 2012 and 

a Stand-By was agreed at Staff level in November 2012 but was not finalised

3.5.2.  Lebanon 

Lebanon  continues  to  suffer  from  an  internal  political  paralysis  and  the  spillovers  of  the 
Syrian conflict, including a stock of refugees that accounts for one quarter of its population. 
This  political  stalemate  has  so  far  prevented  the  authorities  from  adopting  the  necessary 
macroeconomic adjustment and key structural reform measures in sectors such as the energy 
and the public finances sector. Growth has slowed and the fiscal and current account balances 
remain  very  large.  While  the  economy  has  so  far  shown  resilience,  reflecting  the  prudent 
policies pursued by the central bank, reliance on a large inflow of foreign capital, including 
from  the  wealthy  Lebanese  diaspora,  and  the  strength  of  the  banking  system,  the  Lebanese 
economic model is subject to increasing risks.  

The macroeconomic situation remains very vulnerable. Growth is estimated to have finished  
2015  below  2%..  The  fiscal  deficit  is  estimated  to  have  widened  to  8%  of  GDP  in  2015, 
reflecting mainly the increase of interest payments, and the public debt ratio stands  around 
132%  of  GDP,  one  of  the  highest  in  the  world,  and,  according  to  the  IMF's  latest  Debt 
Sustainability Analysis, it is projected continue rising, reaching 143% of GDP in 2020. While 
there  are  considerable  uncertainties  about  the  reliability  of  the  new  current  account  figures, 

42 

 
 
 
the new estimates show a current account deficit of 24.9% of GDP in 2014; 19-21% of GDP 
in 2015; and 18-20% of GDP in 2016. Although declining, this very large deficit, in a context 
of  very  low  oil  prices  and  a  restrained  domestic  demand,  suggests  a  serious  underlying 
problem  of  competitiveness.  Regarding  inflation,  a  combination  of  lower  energy  prices,  a 
stronger  dollar,  against  which  the  Lebanese  pound  is  pegged,  and  a  subdued  domestic 
demand, have resulted in deflation (CPI inflation was -3.4% for the entire year of 2015).   

Despite these macroeconomic risks, the Lebanese economy continues to exhibit its proverbial 
resilience. This resilience is based on the strength of the Lebanese financial system, backed by 
the  competent  management  of  Lebanese  Central  Bank,  the  trust  in  the  currency  peg  against 
the US dollar and by a large international reserve cushion (USD 40.5 billion, including gold, 
at the end of 2015). Moreover, Lebanon continues to attract massive foreign capitals inflows 
into the banking system. These foreign-held deposits allow banks to finance the government’s 
large  deficits  and  refinance  the  huge  public  debt  but  they  also  contribute  to  high  rates  of 
financial  dollarization  (with  foreign  currency  deposits  accounting  in  October  2105  around 
65% of total bank deposits). 

Country-risk indicators : Lebanon
Output and prices

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

Public finances

General government balance

Balance of payments

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

Exchange rate (end of period)

External debt

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

Indicators of EU exposure

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

IMF arrangements

Type
(Date)
On track

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

(% of GDP)

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

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

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

2013

2014

2015

2.0
20.0
1.8

-5.9

16,594.0
-19.4
990.5
35.6
20.0
2003.8

67,049.2
165.5
21.6
no
no

469.0
0.5
0.7
2.8

2.5
15.0
4.8

-8.6

14,798.0
-20.7
680.3
32.1
18.0
2002.40

56,949.6
163.8
19.6
no
no

500.0
0.5
0.9
3.4

none

0.2
20.0
-3.4

-8.0

18,882.0
-20.0
1200.1
37.3
19.0
1666.7

76,130.0
162.4
22.8
no
no

486.0
0.5
0.6
2.6

Indicators of market's perception of creditworthiness

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

B1
B
B

B1
B-
B

B2
B-
B

3.5.3.  Morocco 

The  Moroccan  economy  continued  to  perform  well  in  2015  despite  an  unfavourable 
international  economic  environment  and  external  political  and  security  challenges  in  the 
region.  Economic  growth  is  estimated  to  have  reached  4.7%  in  2015,  recovering  from  the 

43 

 
 
 
2.4%  growth  in  2014  which  was  below  expectations  due  to  underperformance  in  the 
agricultural sector and sluggish manufacturing and construction sectors. Real GDP growth for 
2016  is  forecast  at  around  3%,  subject  to  external  risks  and  persisting  internal  structural 
challenges  of  the  economy.  The  unemployment rate  dropped  slightly  in  2015,  but  remained 
close  to  10%.  Youth  unemployment  is  even  more  worrying,  with  about  28%  of  those  aged 
between 15-24 not being in employment, education or training. 

Average inflation is estimated to have remained low in 2015, at 1.6%, although it picked up 
from  the  even  lower  value  of  0.4%  in  2014  which  reflected  low  energy  and  food  prices.  In 
monetary policy making, the authorities continued to balance controlling inflation with tightly 
managing  the  exchange  rate,  with  the  policy  rate  at  2.5%  since  December  2014.  The 
authorities reaffirmed their intention to move towards a more flexible exchange rate regime; a 
revision in the currency basket in April 2015 (with a reduction in the weight of the euro) was 
presented as a first step in that regard.  

Morocco's current account deficit is expected to have decreased significantly to an estimated 
1.5% of GDP (2.4% excluding official transfers) from 5.7% of GDP (7.4% excluding official 
transfers)  in  2014,  reflecting  lower  import  values  for  energy  and  foodstuffs  and  an  overall 
better  performance  of  exports.  According  to  preliminary  data,  net  FDI  inflows  have  only 
increased slightly, due to unusually high FDI outflows (particularly equity financing), staying 
below 3% of GDP in 2015. International reserves increased to EUR 21 billion in 2015, thus 
covering almost 7 months in next year’s imports.  

The  fiscal  deficit  narrowed  from  4.9%  of  GDP  in  2014  to  an  estimated  4.3%  in  2015, 
reflecting  a  decrease  in  commodity  prices  and  the  commendable  measures  implemented  by 
the  Moroccan  authorities  to  reduce  expenditures,  including  the  reform  of  subsidies.  Public 
debt  continues  to  follow  a  moderate,  sustainable,  upward  trend  and  is  estimated  to  have 
increased only marginally between 2014 and 2015, remaining close to 63.5% of GDP. 

The  financial  sector  is  well  supervised  and  has  strong  fundamentals.  However,  non-
performing  loans  are  starting  to  pile  up,  particularly  in  sectors  most  vulnerable  to  growth 
dynamics  in  the  EU  such  as  tourism.  The  credit  environment  seems  to  have  remained 
subdued,  with  particularly  small  enterprises  being  affected,  prompting  supportive  policy 
measures by the central bank. 

In  July  2014,  the  IMF  approved  a  24-month  Precautionary  and  Liquidity  Line  (PLL) 
arrangement  of  about  EUR  4  billion.  The  final  review  of  economic  performance  under  the 
PLL  was  completed  by  the  Executive  Board  of  the  IMF  in  January  2016,  reaffirming 
Morocco’s continued qualification to access PLL resources.  

44 

 
 
 
 
 
 
 
Country-risk indicators : Morocco
Output and prices

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

Public finances

General government balance

Balance of payments

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

Exchange rate (end of period)

External debt

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

Indicators of EU exposure 

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

IMF arrangements

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

(% of GDP)

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

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

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

2013

2014

2015

4.7
9.2
0.4

-5.2

21,481.9
-7.9
2,258.9
14,532.0
4.7
11.26

20,986.4
26.0
7.0
none
none

3,020.0
2.9
14.4
14.1

2.4
9.9
1.6

-4.9

22,664.0
-5.7
2,739.7
18,029.2
6.1
10.99

28,776.0
29.6
6.8
none
none

3,187.0
3.1
11.1
14.1

4.7
9.7
1.6

-4.3

29,563.9
-1.5
2,841.4
21,072.1
6.7
10.78

27,239.3
29.2
7.0
none
none

3,124.3
3.1
11.5
10.6

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)

Precautionary 
Liquidity Line 
4.12 SDR
August 2012
expired

Precautionary 
Liquidity Line 
3.23bn SDR
July 2014
on track

Precautionary 
Liquidity Line 
3.23bn SDR
July 2015
on track

Ba1 /negative
BBB- /negative
BBB- /stable

Ba1 /stable
BBB- /stable
BBB- /stable

Ba1 /stable
BBB- /stable
BBB- /stable  

3.5.4. 

Syria 

Syria's  economic  and  financial  situation  and  outlook  are  difficult  to  assess,  given  the 
significant  disruption  caused  by  the  ongoing  conflict  and  the  lack  of  reliable  figures.  It  is 
clear,  however,  that  the  conflict  continues  to  have  a  strong  negative  impact  on  the 
macroeconomic situation of the country, including its balance of payments position.  

Since the conflict started 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. 
The Syrian GDP is estimated to have declined by 2014 approximately only 40% of its 2010 
level. Given the magnitude of the fall in the GDP, it is expected that the economy has more 
recently decelerated its decline, although it is not possible to provide an accurate estimation 
for  2015.    According  to  the  Syrian  Central  Bureau  of  Statistics,  average  consumer  prices 
almost quintupled between 2010 and 2015. Price increases affected all categories due to the 
lack of supply and the collapse of the Syrian pound. The value of the Syrian pound (SYP) has 
declined  dramatically  from  55.89  SYP  against  the  EUR  in  2011  to  180.35  SYP  against  the 
EUR in 2014, and 263.99 SYP against the EUR at the end of 2015.  

45 

 
 
 
The  conflict,  by  markedly  impacting  productive  capacity  and  the  state's  revenue-generating 
capacity  and  by  pushing  up  defence  expenditure,  is  also  believed  to  have  resulted  in  a 
deterioration of the fiscal position but there are no reliable fiscal data to report. 

According to EIU estimates, the external debt stock of Syria amounted to USD 5bn in 2011 
(or  the  equivalent  of  about  10%  in  terms  of  the  estimated  2011  GDP)  and  has  remained 
approximately  stable  in  nominal  terms  (reaching  USD  5.3bn  in  2015,  or  about  18%  of  the 
EIU's  estimated  2015  GDP).  Furthermore,  debt  service  paid  has  stopped  almost  completely 
since  2012.  The  trade  balance  has  experienced  a  marked  deterioration  since  2010,  with  its 
deficit increasing to an estimated 17% of GDP in 2015. Exports of goods (fob) decreased by 
almost 85% between 2011 and 2015.  

Considering the sharp drop in export revenue and financial inflows, foreign exchange reserves 
are believed to have dropped considerably. Official reserves are tentatively estimated to have 
decreased  to  around  USD  1.7  billion  in  2014  and  further  to  USD  1  billion  in  2015  (a 
substantial drop from the USD 19.8 billion at end-August 2012, the latest IMF data available).  
The maintenance of a minimum level of reserves has only been possible due to the financial 
support from the allies of the Syrian regime, notably Iran. 

46 

 
 
Country-risk indicators : Syria
Output and prices

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

Public finances

2013

2014

2015

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

-24.7
35.0
89.6

0.4
40
29.2

-4.8
50
33.6

Central government balance

(% of GDP)

-12.9

-10.7

-11.7

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)

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

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

none

1,509.2
-15.9
n.a.
1,895.0
n.a.
140.8

3,578.8
10.0
n.a.
n.a.
n.a.

584.0
0.6
16.3
38.7

1,515.70
-12.4
n.a.
1,428.00
n.a.
180.35

4,062.75
12
n.a.
n.a.
n.a.

445.0
0.4
11.0
29.4

1,666.20
-11.4
n.a.
968.00
n.a.
263

4,785.98
16
n.a.
n.a.
n.a.

389.0
0.4
8.1
23.3

Indicators of market's perception of creditworthiness

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

none
none
none

none
none
none

Source:  Economist Intelligence Unit
* Syria defaulted on EIB loans for a total of EUR  225 million as at end-December 2015

3.5.5.  Tunisia 

In parallel to a protracted and fragile political transition process since the 2011 revolution, the 
Tunisian  economy  has  suffered  from  continuous  domestic  unrest,  regional  instability 
(including  the  impact  of  the  Libyan  conflicts),  and  a  weak  international  environment 
(particularly  in  the  euro  area).  These  unfavourable  developments  substantially  weakened  its 
growth performance, as well as its fiscal and balance of payments positions. In 2015, largely 
as  a  result  of  the  negative  economic  impact  of  terrorist  attacks  (particularly  on  tourism,  the 
transport  sector  and  investment)  and  of  production  disruptions  due  to  social  unrest  growth 
projections have been revised markedly down, while the situation is negatively affecting  an 

47 

 
 
    
    
       
 
 
already  vulnerable  balance  of  payments  and  fiscal  position,  creating  important  financing 
needs. Tunisia 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, and which was subsequently extended 
until December 2015. A successor arrangement is currently being negotiated. It also obtained 
complementary Macro-Financial Assistance (MFA) from the EU of EUR 300 million in the 
form  of  loans  which  was  approved  in  May  2014,  and  EUR  200  million  of  these  were 
disbursed in 2015. The remaining EUR 100 million is expected to be disbursed before June 
2016. In August 2015, Tunisia asked the EU for another MFA operation. The EU is currently 
preparing a proposal for a new MFA, which could be adopted before May 2016. 

Following two years of stable, but low, GDP growth, in the context of the IMF programme 
(2.3% in both 2013 and 2014), growth for 2015 has been revised down to 0.5% compared to a 
forecast of 3% at the beginning of the year. Unemployment remains high at 15%, particularly 
among the young and graduates (over 30%). Inflation has averaged around 4.4% in 2015 and 
is  on  a  downward  trend.  Regarding  the  public  finances,  after  achieving  a  certain  degree  of 
fiscal  consolidation  in  2014,  the  structural  deficit  (excluding  banking  recapitalisation  costs) 
increased  in  2015  from  4.2%  of  GDP  to  4.7%  of  GDP,  largely  driven  by  expenditure 
measures  taken  in  the  aftermath  of  the  terrorist  attacks,  and  despite  expenditure  savings 
generated by the lower than expected oil prices. The 2016 budget law foresees a reduction in 
the  structural  deficit  back  to  4.2%  of  GDP,  to  be  achieved  largely  through  an  increase  in 
revenues (in part due to the introduction of a VAT), and lower expenditure on subsidies. 

The debt of the general government has continued to increase, reaching 53% of GDP in 2015 
and is forecast to peak at 61% of GDP by the end of 2018 before starting to reverse the trend. 
Also,  a  substantial  increase  in  public  debt  amortisations  is  scheduled  to  take  place  in  the 
coming  two  years  (from  about  USD  600  million  in  2015  to  more  than  USD  1.4  billion  in 
2017,  and  almost  USD  1.2  billion  in  2018).  External  debt  increased  from  48%  of  GDP  in 
2011 to an estimated 56.2% of GDP in 2014, and it is expected to peak at 72.3% of GDP in 
2018  before  starting  to  reverse  this  trend.  The  latest  Public  Debt  Sustainability  Assessment 
from the IMF (September 2015) considered the debt dynamics sustainable Tunisia’s sovereign 
ratings have been downgraded several times since 2011, the last time in 2014 (from  Ba2 to 
Ba3 by Moody’s and from BB to BB- by Standard & Poor’s. Despite the decline in oil prices, 
weaker domestic economic activity and improved export performance, the negative effects on 
tourism  of  the  terrorist  attacks  have  contributed  to  keeping  the  current  account  at  an 
unsustainable high level of 8.8% of GDP in 2015. Reserves are estimated to have ended 2015 
close to USD 7.5 billion, at barely 3 months of imports. 

48 

 
 
(%)
(% 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 : 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

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

2013

2014

2015

2.3
15.3
5.7

-6.2

12,376.6
-8.3
818.8
5,589.4
3.4
2.3

18,510.5
54.2
9.6
none
none

2,699.0
2.6
14.6
21.8

2.3
15.3
4.8

-4.1

13,817.5
-8.9
876.1
6,358.4
4.2
2.3

22,543.4
56.2
8.3
none
none

2,686.0
2.6
11.9
19.4

0.5
15.0
4.4

-5.8

13,667.6
-8.8
1,045.1
6,906.1
4.1
2.2

25,138.1
61.6
11.9
none
none

2,887.0
2.8
11.5
21.1

SBA

yes

Ba2
BB
BB-

SBA

yes

Ba3
BB-
BB-

SBA

yes

Ba3
BB-
BB-

3.6. 

Other countries 

3.6.1.  Brazil 

Brazil's  economy  is  currently  experiencing  the  worst  recession  since  the  early  1990s.  GDP 
contracted  by  3.8%  in  2015  dragged  down  mainly  by  a  deterioration  of  domestic  demand. 
Investment  was  particularly  affected,  showing  a  contraction  of  more  than  14%  compared  to 
the previous year. Private consumption, the main growth driver over the past few years, also 
fell  sharply  posting  a  drop  of  4%  in  2015.  Households  are  increasingly  burdened  by  rising 
unemployment and inflation. On the supply side, manufacturing contracted very sharply, by 
6.2%  in  2015,  while  services  fell  by  2.7%.  Net  exports  contributed  positively  to  growth  in 
2015, owing mainly to a collapse in imports of goods and services of over 14%.  

Brazil's  economy  faces  significant  challenges  (both  domestic  and  external),  with  the  most 
pressing ones including: less favourable external environment (slowdown in China, slump in 
commodity prices), financial market volatility which led to capital outflows and depreciation 
of the currency against the US dollar, chronically high inflation (currently at 10.7%), sharply 
deteriorating  public  finances  and  unresolved  structural  problems.  Moreover,  the  ongoing 
investigations of corruption and bid-rigging in the national oil company Petrobras have raised 

49 

 
 
 
 
governance issues, affected confidence and weighed on private consumption and investment. 
Political tensions remain elevated and weigh on implementation of necessary reforms. Given 
the many challenges, the economic situation in Brazil is not expected to improve materially in 
the  short  term.  Latest  data  point  to  continuing  deterioration  of  business  and  consumer 
confidence,  low  industrial  production  and  the  highest  inflation  since  2002.  As  a  result,  the 
European Commission Winter 2016 forecast projects a GDP contraction of 3% in 2016 and a 
modest rebound of 0.3% in 2017.  

The  fiscal  situation  has  been  deteriorating  fast  with  Brazil  posting  a  general  government 
deficit of 10.3% of GDP in 2015. The debt-to-GDP ratio has been increasing rapidly in recent 
years and stood at 67% in 2015. In December 2015, the Congress approved the 2016 budget 
targeting  a  primary  surplus  of  0.5%  of  GDP.  However,  president  Rousseff  subsequently 
vetoed  plans  to  cut  social  spending  and  approval  of  several  other  consolidation  measures  is 
uncertain.  The  worsening  economic,  fiscal  and  political  situation  led  to  a  credit  rating 
downgrade to below-investment grade by both Standard and Poor's and Fitch in the course of 
2015.  In  February  2016,  Standard  and  Poor's  placed  Brazil  further  into  speculative  grade 
territory and Moody's also stripped Brazil of its investment grade.  

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)

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)
(%)
(%)
(%)

2013

2014

2015

3.0
5.4
5.8

-3.3

210,517.0
-3.6
52,090.5
259,285
18.0
2.9

227,042.6
14.0
30.9
0.0
none

1,002.0
1.0
0.4
0.5

0.1
4.3
6.5

-6.0

198,768.0
-4.0
72,935.6
292,818
20.6
3.1

286,320.1
15.8
39.3
0.0
none

975.0
0.9
0.3
0.5

-3.8
6.9
10.7

-10.3

201,775.0
-3.3
67,665.2
318,852
24.9
3.7

306,524.7
19.0
N/A

1,065.0
1.0
0.3
0.5

no

no

Baa2 /stable
BBB /negative
BBB /stable

Baa2 /negative
BBB- /stable
BBB /stable

Ba2/negative
BB/negative
BB+/negative  

South Africa's economic growth, which had been fuelled by favourable external environment 
and easy financing conditions, has slowed down markedly in recent years. Real GDP growth 

50 

 
 
has decelerated from around 5% in the run-up to the financial crisis to 1.5% in 2014. In 2015, 
the  South  African  economy  advanced  by  only  1.3%,  the  lowest  growth  rate  since  the  2009 
recession. Both domestic and external factors play a role in the current economic weakness. 
On  the  external  side,  South  Africa  is  negatively  affected  by  low  commodity  prices  (in 
particular metals and coal), the slowdown in China and in other emerging markets as well as 
by the recent slump in world trade. Positive effects of low oil price had been partly neutralised 
by  significant  depreciation  of  the  Rand.  Domestic  factors  weighing  on  growth  include 
electricity  supply  constraints,  low  consumer  and  business  confidence,  difficult  labour 
relations  and  well  as  political  and  regulatory  uncertainty.  Furthermore,  the  most  severe 
drought in 20 years has resulted in declining agricultural output and food price inflation.  

Growth is expected to remain weak in the medium term. Persistently low commodity prices, 
heightened financial market volatility, diminished consumer and business confidence as well 
as tighter monetary and fiscal policy weigh on the economic outlook. Constrained electricity 
and  water  supply  continues  to  limit  growth  and  deter  fixed  investment.  According  to  the 
European Commission Winter 2016 forecast, growth is projected to reach 1.1% in 2016 and 
1.4% in 2017.  

In  response  to  the  deteriorating  economic  outlook,  fiscal  policy  sets  a  course  of  more  rapid 
fiscal consolidation. Over the next three years, the government aims to achieve an ambitious 
goal of 2.4% for the fiscal deficit by lowering the expenditure ceiling, bolstering tax revenues 
and  restricting  the  growth  of  the  wage  bill.  Monetary  policy  has  also  become  tighter  amid 
rising  inflation  risks.  Rising  public  debt  (44%  of  GDP  in  2015),  together  with  decelerating 
GDP  growth,  prompted  the  main  rating  agencies  to  revise  their  outlook  in  December  2015 
(from  stable  to  negative  for  Moody's  and  Standard  and  Poor's)  or  to  downgrade  their  long-
term foreign currency rating (from BBB to BBB- for Fitch). The possibility of a credit rating 
downgrade  to  below-investment  grade  within  one  or  two  years  represents  a  real  risk  for 
macroeconomic stability and fiscal sustainability.  

51 

 
 
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 

*
**  Based on Q3 2015 data, Q4 2015 data not yet available

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

(% of GDP)

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

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

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

2013

2014

2015

2.2
24.1
5.4

-3.9

85,329.0
-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
1.2

1.5
24.3
5.3

-4.1

82,405.6
-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
1.4

1.3
24.5
5.2

-3.9

87,305.3
-4.4
N/A
41,208.3
6.4
14.2

121,016.0
43.0
N/A

1,101.9
1.1
0.9
1.3

no

no

Baa1 /negative
BBB /negative
BBB /stable

Baa2 /stable
BBB- /stable
BBB /negative

Baa2/negative
BBB-/negative
BBB-/stable

52