Talks between Serbian representatives and the IMF mission, held between 3 and 15 October, have concluded, having achieved two goals – reviewing the results of the stand-by arrangement (SBA) and reaching an agreement on the economic programme within the three-year Policy Coordination Instrument. Agreement has been reached with the IMF team regarding both goals:

• We have successfully concluded the fourth and last review of the implementation of the current SBA, signed in December 2022 for a period of 24 months.
• At the same time, we have reached agreement about the economic programme and medium-term policies which the IMF will support with the three-year Policy Coordination Instrument (PCI). The PCI is a non-financial, advisory instrument for countries running a strong economic policy, which is why such an instrument is the right choice for Serbia. It is a fact that Serbia has already had two extremely successful non-financial instruments of this type, and that the current SBA was considered a precautionary arrangement already as of the second review (one review sooner than expected at the time of approval), thus confirming that Serbia is implementing credible policies.

“Considering the strong progress that Serbia has achieved over the past twelve years, the PCI should endorse the preservation of the attained results and the continued implementation of an ambitious reform agenda”, said Governor Jorgovanka Tabaković.

The achieved agreements should be approved by the IMF Executive Board in December.

“After the IMF’s previous mission in March this year, I said that in the period ahead we are looking to the formal introduction of Serbia among investment grade countries, which is a rating Serbia deserves. I extend my congratulations to all of us for the investment grade that Serbia has deserved a long time ago! The IMF’s new assessments are another confirmation of the good policies conducted in Serbia, with which we bolster our economy and, by extension, conditions for further rating upgrades. We have all the reasons to be realistically optimistic as these conditions facilitate the decision-making process both in the medium and long term, and in turn support further growth in employment and the overall progress of society”, Governor Tabaković noted.

After two-week discussions the IMF concluded the following:

• Macroeconomic outcomes in Serbia remain strong.
• Economic growth and labour market are robust.
• Inflation has declined.
• FX reserves are at a record high level.
• The financial sector is well-capitalised and liquid.
• The public debt share in GDP continues to shrink.

The IMF also emphasised the following in its press release:

1. Reflecting the success of Serbia’s economic programme supported by the SBA, and in view of its commitment to continued strong economic policies, Serbia was awarded an investment grade credit rating for the first time, by S&P Global Ratings, in October 2024.
2. Serbia’s macroeconomic outcomes in 2024 are impressive. The IMF estimates that the growth in 2024 will reach 3.9% and then accelerate to around 4.25% in the years to come.
3. Inflation returned to the NBS target tolerance band, owing to monetary policy measures and easing energy and food prices.
4. An increase in the fiscal deficit to 2.7% of GDP in 2024 will serve to finance additional needs in infrastructure, social policy and defence. Public debt is expected to decline to around 48% of GDP by the end of 2024, on the back of strong fiscal revenue performance, robust economic growth and a recent upward GDP revision.
5. The IMF anticipates that strong FDI inflows will continue and will be more than sufficient to cover the current account deficit, which was the case in the previous ten years as well.
6. The key macroeconomic risks concern: external demand, the outlook for global commodity prices, deepening geoeconomic fragmentation, as well as the exposure of agricultural output and economic activity to the impact of climate changes and extreme weather conditions.
7. Serbia has built sufficient reserves and buffers against risks which stem largely from the external environment. FX reserves and government deposits are high, public and external debt are sustainable аnd the banking sector is strong. Continued prudent policies provide an additional important buffer.

“The ensured record high FX reserves and preserved relative stability of the exchange rate of the dinar against the euro were and remain an important pillar of the certainty of doing business and preservation of financial stability of the country. Inflation within the NBS target tolerance band, record high dinar savings and the lowest share of NPLs speak in favour of monetary and financial stability. All this, along with the anticipated acceleration of GDP growth to the range of 4–5% in the coming years, shows that Serbia is in excellent hands”, Governor Tabaković concluded.