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IMF Successfully Completes the First Review of Serbia’s Economic Programme Under the Policy Coordination Instrument

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

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. (To ensure further progress in dinarisation, in mid-December the NBS and the Serbian Government signed the new Memorandum on the Strategy of Dinarisation of the Serbian Financial System).

Fiscal performance remains sound, modernisation of the Tax Administration has accelerated, and public debt as a share of GDP has fallen sharply. The 2019 budget 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.

(For the sake of reminder, Serbia is the second IMF member using the PCI. 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 programme 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).

Governor's Office