At the end of the visit to our country, the IMF mission assessed that the Serbian economy is coping well with the challenges imposed by the Covid 19 pandemic and that a strong economic recovery is underway, supported by significant government measures, the National Bank of Serbia announced today.
A strong economic recovery is underway, made possible by timely and comprehensive monetary and fiscal policy measures, which is why the IMF estimates Serbia’s GDP growth at 6.5 percent this year, and then continued high growth of 4.5 percent in 2022, was assessed at the final meeting of the delegation of the Republic of Serbia with the IMF mission within the first review of the results of the agreed economic program supported by the non-financial Instrument for Policy Coordination.
“Serbia is among the few countries that reached the pre-crisis level of gross domestic product at the beginning of this year, and the faster than expected growth of economic activity indicates that real economic growth this year could exceed 6.5 percent. As the IMF Mission assessed, the fact that, acting in a timely and comprehensive manner, we saved our economy and jobs, thus preserving the confidence of our citizens and the economy that we will continue to ensure macroeconomic and financial stability in all countries, also contributed to this conditions,” said the NBS Governor Jorgovanka Tabakovic on that occasion.
As stated, during the two-week talks, the current and projected fiscal, monetary and overall macroeconomic trends were discussed, as well as the realization of the established goals of the economic program.
The IMF mission also assessed that the current inflation trend is influenced by temporary factors, primarily the low base from last year, as well as global trends that affect energy prices and unprocessed food prices.
They expect that, as in other countries, inflation will continue to move at similar levels for a few more months, after which, during 2022, it will return to the target corridor.
The Mission estimates that the NBS responded to such developments in a large number of countries by adequately tightening monetary conditions by increasing the average repo rate within the interest rate corridor, without changing the reference interest rate.
It is also stated that core inflation in Serbia is relatively stable, which indicates that inflationary pressures are temporary.
It is projected to further reduce the current account deficit to about four percent of GDP this year, while maintaining its full coverage by the net inflow of foreign direct investment. It was also assessed that the banking sector remained stable, well-capitalized and liquid.
Also, it is concluded that the dinar exchange rate remained stable.
“We are carefully measuring the reaction of monetary policy to temporarily higher inflation. We have taken the first steps towards tightening monetary conditions, and we continue to monitor and evaluate all developments. In addition, the movement of year-on-year core inflation in the lower half of the target range throughout the year, which is due to the preserved stability of the exchange rate, also indicates the temporary nature of current inflation factors,” the governor pointed out.
The mission estimates that excellent fiscal results were recorded during 2021, and on that basis we will have a two percentage point lower deficit than previously planned.
This result is supported by significantly higher tax revenues thanks to strong economic activity, and it is also great that part of the higher revenues will be used to finance investments.
The mission also estimates that Serbia is continuing with structural reforms, as well as that some important reforms are yet to come, such as the development of the capital market in order to provide additional support to domestic investments.
“The NBS continues to pursue a predictable and credible monetary policy with the aim of preserving price and financial stability, with the support of economic growth, whose projections we have increased in the medium term. With dynamic economic growth in the coming period, our citizens and the economy can expect the creation of new jobs and a stimulating business environment, as important bases for sustainable and strong economic growth and development, and with further growth of living standards of our citizens,” concluded the Governor Tabakovic, Politika reports.
