Serbia has made impressive economic achievements during most of the past decade, but the consequences of the war in Ukraine and problems in the energy sector have led to the need for large external and fiscal financing, the International Monetary Fund (IMF) announced.
In the report on Serbia published today, after the completion of the first review of the stand-by arrangement, the IMF stated that the standard of living in Serbia has improved over the past decade, that inflation has fallen, that public finances have been strengthened, and reserves have increased, with the help of a large inflow of foreign direct investments (FDI).
However, the consequences of the war in Ukraine, especially the sharp rise in energy prices in the world, and deep-rooted problems in the energy sector of Serbia, which surfaced last year, led to the need for large external and fiscal financing, which led the authorities to request a stand – great arrangement, according to the IMF.
The report states that fiscal and external results for 2022 were better than expected and that unemployment remains low. Record foreign direct investment inflows continue to boost reserves, but inflation remains a major challenge, it added.
Primarily due to high food and energy prices, total inflation is now significantly above the target range of the National Bank of Serbia (NBS), and base inflation has also risen sharply, it is stated.
Fiscal policy is expected to remain restrictive in 2023, despite additional spending measures, the IMF states and indicates that there are still structural problems in the energy sector, which are the focus of the stand-by arrangement.
The report also notes that lingering geopolitical challenges remain. The IMF mission paid a two-week visit to Belgrade at the end of March and the beginning of April, on the occasion of the first revision of the stand-by arrangement.
The stand-by arrangement worth 2.4 billion euros is implemented from December 2022 and lasts until the end of 2024. It was agreed in October last year, when it replaced the then-current Instrument for Policy Coordination
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