IMF successfully completes first review of Serbia’s economic program under PCI – Economic growth in 2018 projected at 4.2%

On 21 December 2018, the IMF Executive Board successfully completed the first review of the results of the economic program of the Republic of Serbia supported by the Policy Coordination Instrument (PCI), the National Bank of Serbia (NBS) announced.

The Executive Board’s decision was taken without a formal meeting, a possibility used when it is assessed that a formal discussion is not necessary.

– The Board positively appraised the implementation of the agreed economic program and confirmed that the Republic of Serbia continues to achieve good macroeconomic results. Serbia’s strong economic performance continues, supported by the recovery of private consumption, robust foreign direct investments and exports. The IMF projects economic growth at 4.2% in 2018 and 3.5% in 2019 – the NBS announced.

The IMF assesses that inflation continues to move within the NBS target tolerance band. Bank lending growth and private sector wages are strengthening. The dinar has remained broadly stable against the euro. The IMF praises the steps to increase the use of the dinar in bank lending and deposits, which are gradually yielding results.

The central bank reminds that, to ensure further progress in dinarization, in mid-December the NBS and the Serbian Government signed the new Memorandum on the Strategy of Dinarization of the Serbian Financial System. According to the IMF, fiscal performance remains sound, modernization of the Tax Administration has accelerated, and public debt as a share of GDP has fallen sharply.

The 2019 budget, the IMF says, safeguards the major fiscal adjustment made in recent years and foresees a further decline in public debt, while accommodating higher capital investment spending and unwinding of necessary temporary measures.

The IMF concludes that Serbia will remain committed to making further progress on structural reforms in 2019. The measures envisaged include a reduction in the size of the shadow economy, strengthening of the public administration and restructuring of state-owned enterprises and financial institutions. A focus is placed on reforms aimed at fostering private sector-led growth and ensuring that Serbia is put on a faster convergence towards EU income levels.

Serbia is the second IMF member using the PCI, the NBS reminds. The PCI is available to all IMF members that do not need Fund financial resources, but seek to demonstrate commitment to a reform agenda.

This new program of cooperation was approved to Serbia in July 2018 with the aim of maintaining macroeconomic and financial stability and continuing structural and institutional reforms in order to encourage faster and inclusive growth, job creation and a further rise in the standard of living.

Vlada Republike Srbije

Poreska uprava Srbije

Narodna banka Srbije Beograd

Međunarodni monetarni fond - MMF Beograd

Government of Serbia

Tax Administration

National Bank of Serbia

NBS

International Monetary Fund

IMF

IMF Executive Board

Memorandum on the Strategy of Dinarization of the Serbian Financial System

GDP

gross domestic product

economic growth of Serbia

2019 Serbian budget

Policy Coordination Instrument

PCI