The International Monetary Fund on Tuesday commended Serbia’s strong economic performance but said greater effort was needed to curb its high levels of debt.
In a statement after an IMF mission completed its fourth and fifth reviews of a 1.2-billion-euro loan deal, the Fund forecast Serbian inflation at 1.3 percent this year, well below the central bank’s target of 2.5 to 5.5 percent.
It commended the government’s fiscal consolidation measures and said it expected the budget deficit to reach 2.5 percent of national output in 2016, compared with a targeted 4 percent, if the government continued to spend prudently.
“Strong performance under Serbia’s economic programme continues. Economic growth is strengthening, supported by robust investment and rising net exports,” the head of the IMF mission to Belgrade, James Roaf, said in a statement.
But he said “more determined reform is needed of state-owned enterprises, including large utility and mining companies,” to curb the debt, which is expected to reach 78 percent of national output this year.
“Over many years, the failure to restructure inefficient and unviable state-owned enterprises has been a major obstacle to private sector-led growth and has led to the repeated assumption of liabilities from these companies onto the public debt,” Roaf said.
Serbia hopes to join the European Union in 2020 but is struggling to meet EU demands to reduce state involvement in the economy. Unemployment at 18 percent is among the highest in the Balkans.
Roaf said the IMF would address public sector wages and pensions later this year when it reviews Serbia’s 2017 budget.
“It is clear wages must remain at the present level,” he said, endorsing a recommendation on Monday from a government advisory body.
Restructuring big state-owned companies means they would have to lose thousands of jobs to make them more efficient.
That would put pressure on the new government, which prime minister-designate Aleksandar Vucic is in the process of forming following his victory in a parliamentary election on April 24.
“Durability of reforms will depend on the government’s persistence … if that does not happen, we would see some of the successes unravelling,” Roaf said.
The Fund raised its forecast for Serbia’s 2016 growth to 2.5 percent from 1.8 percent, in line with government estimates.
The mission is in Serbia to assess compliance with policies agreed in the loan deal.
Source; Reuters
