The Board of Executive Directors of the International Monetary Fund (IMF) has decided to successfully complete the third review of the results of Serbia’s economic program, supported by the Policy Coordination Instrument (PCI).
Given the sound implementation of economic policy measures and good macroeconomic performance, the decision was taken without holding a formal Board meeting, which is an opportunity to be used when assessing that no formal discussion is needed, the National Bank of Serbia said.
The Committee assessed that Serbia continues to successfully implement the defined economic program, with good domestic growth factors, low inflation, stable financial system, implementation of structural reforms and further reduction of the public debt to GDP ratio.
“Serbia continues to achieve good economic results, with growth supported by all components – consumption, public investment, exports and record high FDI inflows. Domestic factors, strong domestic demand, fully offset the negative impacts from the external environment. Therefore, for 2020 The IMF is projecting for Serbia to grow at a rate of 4.0 percent”.
The Committee noted that the program was being implemented as planned and that the quantitative targets for the end of September 2019 were met. It is pointed out that inflation in Serbia is kept low and continues to move near the lower boundary of the NBS inflation corridor.
“The National Bank of Serbia continues to pursue adequate monetary policy, and in low inflationary pressures it lowered the reference interest rate three times since July. The strong inflow of FDI during most of 2019 was a factor in the pressure on the dinar strengthening, and in such conditions the NBS, on the foreign exchange market, was a net buyer of foreign exchange”, it is added.
The financial system of Serbia is sound, as evidenced by all indicators, while an important support for medium-term growth will be the development of the capital market and the continuation of dinarization.
“Good fiscal results continue, with further reductions in public debt and progress on tax administration reform and strengthening of the public investment management framework. Fiscal discipline is expected to continue in the coming period, with a fiscal deficit of 0.5 percent of GDP which is planned in the 2020 budget, provides for further reduction of public debt while creating fiscal space for capital investment and further reducing the tax burden on labor”.
The IMF welcomes further improvements in labor market conditions, with wage increases and unemployment falling. The Committee also estimates that economic policy makers in Serbia remain committed to implementing structural reforms in 2020, in order to increase Serbia’s potential growth and further investment growth.
NBS Governor Jorgovanka Tabakovic said on the occasion of the IMF’s decision that, given the economic results of our country, the decision was expected.
Serbia will continue to implement its economic program by strengthening domestic growth factors, keeping inflation at a low level, and maintaining a stable and sound financial sector in the future”, said Governor Tabakovic. She also emphasized that all measures that will be taken will aim at raising the living standards of our citizens and stimulating business conditions for our economy.
She also recalled that in November, Tao Zhang, the IMF’s deputy general director, visited Serbia, assessing that “over the seven years, which is not a long period, Serbia has made a complete turnaround in running the economy”, that “low inflation and a stable financial sector are significant support for sound public finances”, which the Board of Directors has now confirmed.
The Policy Coordination Instrument was approved to Serbia in July 2018 for a period of 30 months, it is of advisory nature and does not provide the use of funds.
Serbia’s economic program, supported by the IMF with its Instrument, aims to preserve macroeconomic and financial stability and continue structural and institutional reforms to stimulate faster and inclusive growth, create new jobs and further increase the standard of living of the citizens, the NBS said.
