08/07/2024

IMF: Successful completion of the third review – continuation of Serbia’s robust macroeconomic results

The Executive Board of the International Monetary Fund (IMF) made a decision on successful completion of the third (penultimate) review of the results of the economic programme of the Republic of Serbia, supported by the stand-by arrangement (SBA). The IMF commended the results achieved within the programme. Growth is accelerating, inflation is falling, the current account deficit is narrowing, reserves are at a record high, and the share of public debt in GDP is declining. All quantitative performance criteria and indicative targets are met, and the structural reform agenda is advancing well.

“The IMF’s decision is yet another recognition of the good policies Serbia has adopted and implemented. I am not referring to economic policy only, but to the overall policies and the relations we build with the world that we are a part of. Working proactively and in a coordinated manner even in conditions of pronounced global challenges, we have created numerous buffers as a prerequisite for a prompt response, which the IMF welcomes as well”, said Governor Tabaković. 

This time again the decision was made without convening a formal Board meeting, which is possible only if a country is pursuing sound economic policies and achieving good macroeconomic results. “Such IMF’s practice is consistent with their view their Serbia is an excellent example of a country with a strong track record that has earned confidence with its results”, noted the Governor.

With its positive assessments, the IMF once again confirms that the Republic of Serbia’s implementation of the agreed economic programme is on track, even better than planned, and that the outlook for the period ahead is bright:

  • Economic growth has stepped up, and the labour market is strong, with unemployment at the lowest level on record and further growth in real wages.
  • Growth is projected to measure around 4% this year and accelerate further to over 4% next year.
  • On a firm downward path, inflation returned within the target band in May. Average inflation is projected at the NBS target midpoint of 3% in 2025 and 2026.
  • FX reserves are at record high levels.
  • The banking sector is sound.
  • The current account deficit of the balance of payments narrowed down appreciably in 2023.
  • The share of public debt in GDP contracted further. Despite the ambitious investment projects within the “Leap into the Future – Serbia Expo 2027” development plan, its share will maintain a downward path.

“If we judge on the basis of results - and results should be the key measure, we have met all our statutory objectives.  

  • Inflation was halved last year, and in May this year it returned within the target band of 3±1.5%.
  • We increased further our FX reserves by EUR 5.5 bn last year, and by over 11% this year.   
  • Last year the dinar strengthened against the euro by 0.1%, the same as in the year to date, staying one of the key pillars of consumer and investment confidence for our citizens and businesses.
  • Dinar savings went up by around 45% in 2023, and by more than 16% in the year so far, to RSD 161 bn.
  • The stability of the financial sector and asset quality have been preserved, with an NPL ratio of around 3%.
  • In 2023, we recorded the lowest current account deficit ever, equalling 2.6% of GDP, as well as a rise in the exports of goods and services of as much as 8% despite weaker external demand.    
  • A new record was posted also in terms of FDI inflow – EUR 4.5 bn, mainly to tradable sectors, with the majority of past investments now contributing to our export performance.
  • In such conditions, the Serbian economy has improved its financial result from year to year, posting in 2023 a broad-based record net profit of RSD 972 bn.

“The IMF’s assessment that Serbia is recording excellent results and the fact that we are a half a step away from investment grade, which we have long deserved, confirm the appropriacy of the policies Serbia implements. It all comes down to us, and we in Serbia have shown that we are ready to adopt, without any excuses, measures that will enable employment growth and the preservation of real wages even in the most difficult conditions”, concluded Governor Tabaković.

The IMF Executive Board’s positive assessment of Serbia’s performance enables access to around EUR 400 mn (SDR 316.46 mn), in addition to the funds made available after conclusion of the second review which were not drawn down (SDR 316.53 mn). Having in mind the substantial reserves, the creation of fiscal space and sustainable financing of the balance of payments, going forward the arrangement will continue to be treated as precautionary (i.e. without any drawdowns, except in case of balance of payments needs). Such treatment began from the previous review, which is one review earlier than expected at the time of SBA approval.

(The current SBA worth around EUR 2.4 bn (SDR 1.89 bn or 290% of our quota in the IMF) was approved to the Republic of Serbia on 19 December 2022, for a period of 24 months. The SBA is intended as support to advancing the structural reform agenda, with a special emphasis on the energy sector. The goals of the agreed economic programme are to preserve macroeconomic and financial stability, to strengthen the economy’s resilience to the energy crisis, and to foster higher, greener, inclusive and sustainable growth over the medium term by implementing comprehensive structural reforms.)

Governor’s Office