30/06/2025

IMF: Successful completion of the first review under the Policy Coordination Instrument – sound macroeconomic policies have delivered impressive results

At its meeting of 30 June, the Executive Board of the International Monetary Fund (IMF) made decisions on:

1. successful completion of the first review of Serbia’s performance under the Policy Coordination Instrument (PCI);
2. successful completion of 2025 Article IV Consultation with the Republic of Serbia.

After the first review of performance under the current non-financial instrument, the IMF assessed that the Serbian authorities are maintaining fiscal discipline and implementing macro-critical structural reforms under the PCI. While Serbia faces domestic and external uncertainties, it has built strong buffers to withstand potential shocks. Reinvigorating reforms to improve the business environment would help sustain Serbia’s strong growth over the medium term.

• Serbia’s sound macroeconomic policies have supported the economy’s resilience amid a challenging global environment.
• After the temporary slowdown in early 2025, the IMF projects real GDP growth at 3% in 2025, rising to 4% in 2026 and 4.5% in 2027.
• Headline inflation has returned to the NBS’s target band  (3%+/-1.5 pp), driven also by declining energy prices and moderating core inflation. The monetary policy stance is appropriately restrictive. The IMF projects inflation at about 3% in 2026 and 2027, which is around the NBS’s target midpoint.
• Despite higher imports supporting the public investment drive and weaker external demand, Serbia’s FX reserves remain ample. The IMF projects FX reserves to stay high in the coming period as well, as an important pillar of sustainability of Serbia’s external position.
• According to the IMF, despite increased public investment, the fiscal deficit remains under control due to strong revenue performance and prudent management of current spending.

The IMF assesses the risks to the outlook as elevated. A global slowdown and further geoeconomic fragmentation could weigh on exports and FDI. Domestically, heightened political tensions could erode investor and consumer confidence. Still, Serbia is well-positioned to manage potential shocks — FX reserves and government deposits are high, public debt is declining, and banks are well-capitalised and liquid.

Ms Gita Gopinath, First Deputy Managing Director, made the following statement:

• Serbia’s prudent macroeconomic policies and strong engagement with the IMF have delivered impressive results. Growth has been resilient, and fiscal and external buffers have strengthened. Reflecting these accomplishments, Serbia received its first-ever investment grade sovereign rating in 2024.
• Under the Policy Coordination Instrument, the Serbian authorities have continued their commitment to sound economic policies and structural reforms.
• In light of easing inflation and heightened domestic and external challenges, the planned fiscal expansion focused on investment can help cushion the near-term slowdown while boosting medium-term growth. Fiscal policy anchored to the deficit target, which safeguards fiscal credibility and contains pressures on current spending, is critical for overall stability.
• Further energy reforms remain crucial for securing stable energy supplies.
• Serbia faces medium-term challenges including from population aging. Enhancing productivity will be critical to sustaining income convergence with advanced economies.

In general, the IMF’s Executive Directors commended Serbia’s prudent macroeconomic policies and strong commitment to reforms.

They emphasized the importance of sustaining fiscal discipline, rebuilding buffers to shocks and increasing productivity. They underscored that a fiscal deficit of 3% of GDP or lower would allow for priority investment spending, while preserving hard-won fiscal credibility. They commended the authorities’ commitment to adhere to the wage and pension special fiscal rules, which should help to keep the share of public debt in GDP firmly on a downward path and support investor confidence. They welcomed the authorities’ commitment to strengthen the financial viability of energy state-owned enterprises and support investment in a more diversified energy mix.

“The decision of the IMF’s Executive Board is another confirmation that we are pursuing a sound economic policy in Serbia. In the period of heightened global uncertainties, the reserves we have built and the stability we have ensured are not only a basis for citizens’ and investors’ trust – they are a resource for the future. The IMF assesses that the NBS’s FX reserves are very high according to their methodology as well. I wish to add that in June we were the net buyer of foreign exchange in the IFEM and we raised the amount of gold in our reserves to over fifty tonnes, which reflects responsible management that is important at all times, but especially in the conditions prevailing in today’s world,” concluded Governor Jorgovanka Tabaković.

(The Policy Coordination Instrument was approved to the Republic of Serbia on 9 December 2024 for a period of 36 months. It is advisory in nature and does not involve the use of financial resources. It is approved to countries that are implementing credible economic policies. Performance under the programme is monitored within regular semi-annual reviews.

Consultations under Article IV of the IMF’s Articles of Agreement are conducted with all member countries as part of the surveillance function and represent a regular, annual review of economic and financial policies of a country, providing a signal to investors and international institutions about the credibility of the economic policy conduct and reform priorities of the country. The previous Article IV consultations with Serbia were successfully conducted in 2023.)

Governor's Office