Via IMF (Den Internationale Valutafond)

IMF Staff Completes Review Mission to Serbia

October 15, 2019

End-of-Mission press releases include statements of IMF staff teams that
convey preliminary findings after a visit to a country. The views expressed
in this statement are those of the IMF staff and do not necessarily
represent the views of the IMF’s Executive Board. Based on the preliminary
findings of this mission, staff will prepare a report that, subject to
management approval, will be presented to the IMF’s Executive Board for
discussion and decision.

  • IMF staff reached staff-level agreement on policies needed to
    complete the third review under the Policy Coordination Instrument.
  • Serbia’s economic performance remains robust, with unemployment falling
    to record-low levels, and GDP growth projected to accelerate to 4 percent
    in 2020.
  • Structural reforms continue to advance albeit with delays in certain

An International Monetary Fund (IMF) mission, led by Jan Kees Martijn,
visited Belgrade during October 3 – 15, 2019, to hold discussions on the
third review under Serbia’s Policy Coordination Instrument (PCI). At the
conclusion of the visit, Mr. Martijn issued the following statement:

“The IMF mission held constructive discussions with the authorities and
reached staff-level agreement on policies needed to complete the third
review under the PCI. End-September 2019 quantitative targets are expected
to have been met, and implementation of structural reforms has continued,
albeit with delays in some areas. The agreement is subject to completion of
key policy actions, and approval by IMF Management and Executive Board.
Consideration by the Board is tentatively scheduled for the second half of

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“Serbia’s economic performance remains robust, with unemployment falling to
record-low levels. We project real GDP growth at 3.5 percent in 2019 and 4
percent in 2020, supported by strong domestic demand. Inflation has
remained low and is expected to be in the lower half of the inflation
target range in 2020. The accommodative monetary stance remains appropriate
in light of low inflationary pressures.

“Strong fiscal performance continued in the first three quarters of 2019.
The general government recorded a surplus during January-August, public
debt continues to decline, and yields on government bonds have reached
historically-low levels.

“The government adopted a supplementary budget, allowing for additional
capital spending, a one-off payment to pensioners, and increases of public
sector wages. While these measures do not jeopardize fiscal sustainability,
the authorities should closely monitor budget execution through the end of
the year to make sure the deficit stays within the program ceiling.
Regarding wages, giving larger increases to retain specific groups of
workers is justified. However, the overall wage bill is now growing faster
than nominal GDP, for a second year in a row, which deviates from the
authorities’ commitments in this area and our advice.

“The mission agreed with the authorities on the key parameters of the 2020
budget, targeting an overall fiscal deficit of 0.5 percent of GDP. This
level would preserve fiscal discipline and keep public debt on a downward
path. The reintroduction of pension indexation in 2020 will ensure a more
rules-based system. Current plans to introduce a new set of fiscal rules
for 2021 onwards will help preserve hard-won gains and ensure fiscal

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“The financial sector remains stable. Non-performing loans in the banking
sector have fallen under 5 percent, the lowest level since 2008. The
deposit insurance framework has been strengthened. Developing capital
markets and continuing to promote dinarization will be important to further
enhance financial stability and support medium-term growth.

“Structural reforms continue to advance but stronger commitment to
implementation in certain areas is needed to boost Serbia’s growth
potential and limit fiscal risks. Progress has been made in reforming tax
administration, strengthening public investment management frameworks, and
privatizing Komercijalna. However, the reforms of the public wage system
and public employment framework have faced substantial delays. Further
actions are needed to strengthen SOE management and corporate governance. A
thorough assessment of electricity tariffs is warranted to ensure full-cost

“The mission is grateful for the authorities’ hospitality and close

IMF Communications Department

PRESS OFFICER: Gediminas Vilkas

Phone: +1 202 623-7100Email: