Press Release: Republic of Serbia-Conclusions of an IMF Staff Visit

February 10, 2012

Press Release 12/45
February 10, 2012

An International Monetary Fund (IMF) mission headed by Zuzana Murgasova visited Serbia during February 2-9, 2012 for discussions on the status of the precautionary Stand-By Arrangement (SBA) with Serbia. Ms. Murgasova issued the following statement today in Belgrade:

“The authorities’ policy response to the slowing growth and falling inflation in 2011 was broadly appropriate. Amid faltering euro area economic activity, Serbia’s GDP is projected to grow by ½ percent this year, with high and rising unemployment being a key concern. The GDP projection is in line with the National Bank of Serbia (NBS) forecast. On the positive side, inflation has been slowing down and is expected to return within the NBS’s tolerance band in early 2012.

“Performance against the end-2011 targets was broadly in line with the SBA, although the target on the general government deficit was missed by a small amount, as additional spending restraint did not fully compensate for revenue shortfalls. Completion of the first review under the SBA has been postponed as the 2012 budget deviated from the agreed fiscal program, in particular with regard to higher planned issuance of public debt (including government guarantees) and domestically-financed projects.

“The mission focused mainly on fiscal policy for 2012. In part reflecting lower growth, the 2012 fiscal deficit will be significantly higher than targeted under the 2012 budget in the absence of additional efforts. The mission welcomed the authorities’ commitment to meet the program’s quarterly deficit targets, including through exercising spending restraint.

“With the public debt to GDP ratio projected to be above the legal limit of 45 percent of GDP at end-2012, the mission pointed out that maintaining debt sustainability requires effective and credible medium-term fiscal consolidation.

“It was tentatively agreed that an IMF mission will return to Belgrade in mid-2012 to discuss with the new government the steps needed to resume program reviews. These would include a supplementary 2012 budget consistent with the program’s debt and deficit objectives, a medium-term fiscal consolidation program, and a package of growth-enhancing structural reforms. The mission has prepared an Aide-Memoire that details the key recommendations of the staff visit. The document is planned for publication shortly.”


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