As of November 1, we are expecting a new increase in the price of electricity by eight percent and gas by 10 percent, followed by a new price increase in the same percentages in May 2024, according to the just published report of the International Monetary Fund for Serbia.
Since May 1 this year, electricity in Serbia has become more expensive by eight percent, and gas by 10 percent. Despite announcements that “if the situation with energy sources remains like this, there will be no increase in electricity prices” (Vučić, June 1, 2023), according to the IMF report, this increase will happen in November this year and May next year – as originally planned .
“A further increase in electricity and gas prices is needed – from November 2023 and during 2024 in order to eliminate all budget subsidies to state energy companies until the end of the arrangement with the IMF and to finance much-needed investment spending in the coming years,” the IMF points out. In the report.
Non-household gas and electricity prices “remain low compared to competitors,” it said.
“So further price increases should not materially affect the competitiveness of companies,” the IMF assessed.
According to the report, the Government of Serbia has agreed that a further increase in electricity and gas prices is necessary.
“The authorities are very aware of the challenges facing the energy sector and are committed to comprehensive reforms to ensure a stable and reliable energy supply, improve energy efficiency and, in the medium and long term, significantly reduce carbon emissions.” The authorities agree that a further increase in electricity and gas prices is necessary to achieve these goals. At the same time, they emphasized the need to protect the most vulnerable members of society from the effects of these increases and the need to preserve Serbia’s competitiveness as a leading regional destination for direct foreign investments. The authorities are planning large investments in the energy sector and state that this will require significant financial resources from state energy companies, the budget and the private sector,” the IMF report states.
Good results despite the shocks
In the report of the International Monetary Fund, published after the completion of the first review of the stand-by arrangement, it is stated that “despite external shocks, Serbia achieved impressive economic results during the last decade, which reflect a stronger economic policy”.
It Is estimated that the consequences of the war in Ukraine and domestic problems, primarily in the energy sector, have hit the economy hard.
The IMF indicates that year-on-year inflation in May of 15 percent is still well above the target.
“With a tight monetary policy that will most likely require a further increase in the reference interest rate of the NBS, inflation should decrease to eight percent by the end of the year, and it is predicted that it will return to the target range in 2024,” says the IMF.
Serbia’s economic growth is expected to drop to two percent in 2023, “as stricter monetary and fiscal policy, still high inflation, weak external demand and tightening of global financial conditions affect economic activity,” the IMF estimates.
The stand-by arrangement between Serbia and the IMF is worth 2.4 billion euros and will be implemented from December 2022 until the end of 2024.
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