The results of the economic programme of the International Monetary Fund in Serbia have exceeded expectations, but the country needs to focus on encouraging the expansion of the private sector, according to the head of the IMF mission to Belgrade, James Roaf.
Serbia has so far managed to establish short-term macroeconomic stability but has failed to resolve its basic structural weaknesses, which has led to slowdown in economic growth, with increasing fiscal problems, Roaf says in an article published in Serbian weekly magazine NIN on Thursday.
The income of Serbia’s population is very low by western European standards and an annual GDP growth rate of around 3% is not enough to lift it. Moreover, the 70% debt-to-GDP ratio makes Serbia vulnerable to external risks, while the economy does not rely enough on the private sector, Roaf noted.
The losses of many state-owned companies are so large that for the government it would be cheaper to pay workers to stay home rather than keep subsidising the loss-makers, while a third of employees of private companies work in the grey sector, the IMF mission leader said.
The only way to increase the income of the Serbian population is to support the expansion of the private sector but reforms need a permanent political and macroeconomic stability as they run counter to the interests of groups that benefit from the status quo, he added.
Last month, Serbia said its real GDP growth slowed to an annual 2.5% in the fourth quarter of 2016, from 2.8% in the previous quarter. Serbia’s average net wage increased by a real 2.6% in 2016 following a 2.4% decline in 2015. In nominal terms, the average net wage was 46,097 dinars ($400.6/372.1 euro) last year, up 3.8% on 2015.