The Board of Executive Directors of the International Monetary Fund (IMF Board) has made a decision on the successful completion of the fourth, penultimate review of the results of Serbia’s economic program, which is supported by the Policy Coordination Instrument (PCI). On that occasion, he assessed that Serbia continues with the successful implementation of the economic program, the office of the governor of the National Bank of Serbia (NBS) announced.
The IMF board assessed the adoption of strict protection measures and the adoption of a large package of measures as extremely positive, stating that the measures were “strong, timely and comprehensive”.
“They assess that the measures are well designed, and in the right way aimed at protecting and supporting households, supporting the preservation of jobs, greater investments in health care, providing sufficient liquidity in the banking system and facilitating the repayment of loan obligations,” the statement added.
It is also stated that the IMF Board stated that Serbia has maintained low inflation and a stable exchange rate, and that the fiscal package adopted in response to the crisis is one of the largest in the region, and that it provides the necessary support to households, businesses and the health system.
Governor Jorgovanka Tabakovic pointed out that the decision on the successful completion of the fourth review of the economic program was expected, adding that in July the IMF Mission assessed that the NBS continued to preserve the necessary monetary and financial stability in these conditions of great uncertainty at the global level.
The IMF board projects that in the conditions of the global shock which strongly affected the external demand and caused disturbances in the global and regional supply chains, the real GDP growth rate of Serbia will be at the level of minus three percent in 2020.
Despite the fact that in June compared to April, they further reduced the growth projections for a huge number of countries, they kept the April projection for Serbia precisely because of a strong, timely and comprehensive response to the crisis. After that, in the conditions of already started economic recovery, they expect strong Serbia’s economic growth of 6 percent in 2021 and 2022, which is one of the fastest recoveries, as well as sustainable growth of at least 4 percent in the medium term.
The IMF Board also expects that inflation in Serbia will remain under the control of the National Bank of Serbia in 2020 and in the medium term. For this year, they project average inflation at the level of 1.5 percent, and after that, they project its gradual approach to the central value of the target in the medium term.
Given the projected economic recovery and the temporary nature of fiscal policy measures this year, according to the IMF, the fiscal deficit in 2021 should be at a level of about 2 percent to decline, with the IMF projecting to and in this, crisis year, its share will remain below 60 percent of GDP.
The IMF Board also estimates that Serbia will continue with a good policy of growth of public investments in 2021, which they expect to be at the level above 5% of GDP in the period from 2021.
“Given the great uncertainty regarding the global economic outlook, the IMF’s recommendation to all countries is to focus on monitoring fiscal risks, as well as considering emergency measures,” the statement said.
The IMF also expects that the current account deficit will decrease as early as 2020, that it will then continue to gradually decrease in the medium term, and that it will maintain full coverage of the net inflow of foreign direct investment.
Governor Jorgovanka Tabakovic estimates that the medium-term macroeconomic framework that the IMF projects for Serbia is quite good, that it projects dynamic growth that has a good structure, with low inflation, good public finances and investor confidence, which is reflected in high inflows of foreign direct investments. For this year, the governor believes that Serbia’s economic growth will be even better than the IMF’s estimates, which were discussed in detail during the June and July meetings with the IMF Mission.
The Policy Coordination Instrument (PCI) was approved to the Republic of Serbia in July 2018 for a period of 30 months, it is of an advisory nature and does not envisage the use of financial resources.
The Serbian Economic Program, supported by the IMF with its Instrument, aims to preserve macroeconomic and financial stability and continue structural and institutional reforms to encourage faster and more comprehensive growth, job creation and further growth of the living standards of our citizens, Nova Ekonomija reports.
