The head of the International Monetary Fund (IMF) mission, in talks with Serbian authorities, Jan Kees Martein, said that in 2021, wage increases in the Serbian public sector should be limited, that pension increases should follow the agreed Swiss formula, and that additional ad hoc increases or payments should be avoided.
In a written statement at the end of the virtual visit to Serbia, in which he presented preliminary findings, Martein stated that the IMF team had reached an agreement with the Serbian authorities on the policies needed to complete the fifth, last revision of the Policy Coordination Instrument (PCI).
“Successful completion of the audit depends on the fulfillment of the remaining program requirements, as well as the approval of the management and the Executive Board of the IMF. The consideration at the Executive Board is tentatively scheduled for the beginning of January 2021,” stated Martein.
Based on the preliminary findings, the IMF team will prepare a report which, after obtaining management approval, will be presented to the IMF Executive Board for consideration and decision.
Martein stated that “the realization of the program generally went according to plan” and that economic activity is recovering after a sharp decline in the second quarter caused by the coronavirus pandemic.
“Monetary and financial measures and a large fiscal package introduced in response to the crisis have played a key and positive role in supporting the economy. It is now expected that GDP will record a real decline of 1.5 percent in 2020, and then an increase of five percent in 2021,” Martein wrote.
He added that those projections are based on the latest data, which indicate a faster recovery than previously expected.
“However, the forecast remains very uncertain, due to the unpredictable impact of the epidemic and the consequent adverse effects on the economy of Serbia and its trading partners.”
Inflation is still low and is expected to remain in the lower half of the NBS target corridor in 2021. The banking system remained stable, liquid and well-capitalized, the statement said.
Martein states that tax revenues exceeded expectations during the fourth revision of the PCI instrument, but that expenditures will be higher considering that fiscal measures have been extended and that the realization of public investments will be accelerated in the last quarter of this year.
“In that context, it is expected that the total fiscal deficit will be below nine percent of GDP in 2020 and that public debt will remain below 60 percent of Serbia’s GDP,” said the head of the IMF mission.
He added that the IMF team reached an agreement with the Serbian authorities on the key parameters of the budget for 2021.
He stated that the budget of Serbia for 2021 should continue to support the economic recovery, while preserving the sustainability of the debt.
