IMF: Serbia's performance robust, record-low unemployment

Serbia's economic performance remains robust and unemployment has fallen to record-low levels, with 3.5 pct and 4 pct growth projected for 2019 and 2020, respectively, an IMF team headed by Jan Kess Martijn concluded at the end of a two-week visit to Serbia.

15 Oktobar 2019 16:34

BELGRADE - Serbia's economic performance remains robust and unemployment has fallen to record-low levels, with 3.5 pct and 4 pct growth projected for 2019 and 2020, respectively, an IMF team headed by Jan Kess Martijn concluded at the end of a two-week visit to Serbia.

"The IMF mission held constructive discussions with the authorities and reached staff-level agreement on policies needed to complete the third review under the PCI. End-September 2019 quantitative targets are expected to have been met, and implementation of structural reforms has continued, albeit with delays in some areas. The agreement is subject to completion of key policy actions, and approval by IMF Management and Executive Board. Consideration by the Board is tentatively scheduled for the second half of December," Martijn told a press conference in the Serbian government building.

"Serbia's economic performance remains robust, with unemployment falling to record-low levels. We project real GDP growth at 3.5 pct in 2019 and 4 percent in 2020, supported by strong domestic demand. Inflation has remained low and is expected to be in the lower half of the inflation target range in 2020. The accommodative monetary stance remains appropriate in light of low inflationary pressures.

Strong fiscal performance continued in the first three quarters of 2019. The general government recorded a surplus during January-August, public debt continues to decline, and yields on government bonds have reached historically-low levels.

The government adopted a supplementary budget, allowing for additional capital spending, a one-off payment to pensioners, and increases of public sector wages. While these measures do not jeopardise fiscal sustainability, the authorities should closely monitor budget execution through the end of the year to make sure the deficit stays within the program ceiling. Regarding wages, giving larger increases to retain specific groups of workers is justified. However, the overall wage bill is now growing faster than nominal GDP, for a second year in a row, which deviates from the authorities' commitments in this area and our advice.

The mission agreed with the authorities on the key parameters of the 2020 budget, targeting an overall fiscal deficit of 0.5 pct of GDP. This level would preserve fiscal discipline and keep public debt on a downward path. The reintroduction of pension indexation in 2020 will ensure a more rules-based system. Current plans to introduce a new set of fiscal rules for 2021 onwards will help preserve hard-won gains and ensure fiscal sustainability," Martijn said.


Photo: Tanjug/F. Kraincanic

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