The Serbian economy continues to show some structural weaknesses that limit potential growth and prevent a faster and more sustainable approach to income in the EU, said the permanent representative of the International Monetary Fund (IMF) in Serbia, Sebastian Sosa.
“In order to catch up with the European standard, it is necessary to accelerate the implementation of key structural reforms. Improving the quality of institutions and management, which includes good governance and management of public companies, is a priority,” Sosa said in an interview with Business Magazine.
He assessed that further solving of infrastructure gaps in Serbia would help support competitiveness, foreign investments and integration into regional and global value chains.
“Fighting irregularities would make business easier, while generating fiscal revenues. Finally, a credible commitment to fighting corruption, strengthening the rule of law and improving the efficiency of the judiciary would boost long-term economic growth,” Sosa said.
He added that the IMF estimates that the real growth of Serbia’s gross domestic product (GDP) next year will be five percent, which is based on the recovery of private consumption, as well as strong investment growth, while the impact of the pandemic will be reduced.
“Given the projected economic recovery, reducing the fiscal deficit to three percent of GDP in 2021 would be appropriate and would ensure that public debt as a percentage of GDP continues to fall. It is therefore important that the budget anticipates the costs of stimulating public investments, including green investments, which will support economic recovery and encourage growth in the medium term,” Sosa said.
According to him, the planned increase in salaries in the public sector of five percent in 2021 is in line with the projected budget deficit of three percent of GDP and enables an increase in capital expenditures.
Answering the question which state companies represent the greatest fiscal risk, he said that the risks of Air Serbia are still high due to the uncertainty of the course of the pandemic.
“EPS, the largest public company, faces liquidity pressures and is another important source of fiscal risks. Also, while HIP Petrohemija’s financial position has remained largely stable in recent years, the company’s fiscal risks could be significant if market conditions significantly worsened,” Sosa said.
Sosa said Serbian authorities had expressed interest in a new arrangement with the IMF and made it clear they did not need financial assistance.
“Therefore, the new program could be the successor to the Policy Coordination Instrument (PCI), which could help Serbia implement policies to strengthen macroeconomic and financial stability, while signaling a commitment to structural reforms. Therefore, the new PCI would be needed not only as an agreement on “fiscal, monetary and financial policies, but also as an ambitious structural reform agenda that the IMF could approve and support,” Sosa said, Beta reports.
