Serbia’s strong economic performance continues, says IMF

Published on 7. November 2017., News

President Aleksandar Vucic has received representatives of an IMF mission visiting Serbia for the eighth, final review of the current three-year arrangement.

The state of public finances, reforms in public enterprises and in the public sector, the framework of the 2018 budget, as well as the conditions for concluding a new arrangement with the IMF, which would not include a loan, were discussed on Tuesday, the president’s press service said in a statement.

Vucic and James Roaf, who leads the IMF mission, “emphasized that Serbia has done serious work during the implementation of the arrangement with the IMF” – while the president “expressed his hope that the IMF will continue to be present in Serbia after the end of the current arrangement.”

“Strong economic performance continues. Notwithstanding a temporary slowdown caused mainly by the drought and electricity disruptions, underlying economic activity remains robust, supported by strong growth of exports, private consumption and investment. Labor market conditions have continued to improve, with new private sector jobs being created and a significant fall in unemployment. We project real GDP growth of two percent in 2017 and 3.5 percent in 2018,” IMF representatives have been quoted as stating.

They also “emphasized that significant fiscal performance, which is above expectations, continues” while the public debt rate dropped by more than ten percent compared to 2015 when it was at its peak.

The key parameters of the 2018 budget have also been agreed during the meeting, the statement added. The priority is to preserve hard-won fiscal achievements,
while supporting growth-enhancing initiatives, such as increasing public investment and reducing the tax burden on low-income workers.

“Remaining structural weaknesses in the public sector should be tackled by fully implementing the reform agenda. The financing of weak public entities through arrears to Srbijagas and electricity company EPS has been significantly reduced, reforms in railways have continued, and pharmaceutical company Galenika has been privatized. However, resolution of some other problem enterprises, especially in the petrochemical and mining sectors, is still pending. Public administration reforms should also be accelerated to improve the quality of public services and reduce fiscal risks. The passage of secondary legislation for the new public wage system will be a key milestone in this regard,” IMF said in a statement published on its website, and added:

“Stronger efforts to improve the business environment are needed to create conditions for faster private sector growth and convergence to EU income levels. Recent improvements in business survey rankings are welcome. But substantial reform efforts are still needed to foster competition and reduce regulatory and administrative burden on enterprises, including by modernizing tax administration and increasing transparency and predictability of public fees and charges.”

The current precautionary arrangement between the IMF and Serbia worth 1.2 billion euros expires in February 2018.