Press Release No. 17/336

IMF Executive Board Concludes 2017 Article IV Consultation and Completes Seventh Review of Serbia’s Stand-By Arrangement

August 30, 2017

• Real GDP is now above pre-crisis levels

• Strong revenue performance has supported fiscal consolidation

• Business environment has strengthened, but further progress in implementing structural reforms is needed

The Executive Board of the International Monetary Fund (IMF) today completed the seventh review of Serbia’s economic performance under the Stand-By Arrangement (SBA). The completion of the review will make available an additional SDR 54.565 million (€64.9 million) available to Serbia under the SBA, bringing the total funds available to SDR 771.705 million (€918.5 million). The Serbian authorities have indicated that they do not intend to draw on the resources available under the arrangement.

The Executive Board today also concluded the 2017 Article IV consultation with Serbia. A respective press release will be issued separately.

The Executive Board approved the 36-month, SDR935.4 million (about €1.2 billion at the time of approval) SBA for Serbia on February 23, 2015 (see Press Release No. 15/67 ).

Following the Executive Board’s decision, Mr. Tao Zhang, Deputy Managing Director and Acting Chair issued the following statement:

“The program remains on track and is supporting improved confidence and stronger growth. Real GDP is now above pre-crisis levels and labor market conditions are firming, while inflation remains anchored within the target band and the current account deficit has narrowed. At the same time, building stronger institutions and further progress on implementing the structural reform agenda are needed to improve economic efficiency, bolster private sector-led growth, and put Serbia on a faster convergence path to create a platform for EU accession.

“Strong revenue performance has supported an important fiscal consolidation and allowed for much less expenditure contraction than originally envisaged. However, containing non-discretionary current spending remains an important priority to support the needed debt reduction while creating fiscal space for higher capital spending and potentially for targeted reductions in tax burdens. Reforms in areas that have faced delays – modernizing education, strengthening tax administration, and restructuring of state-owned enterprises and utilities – should be carried out expeditiously.

“Monetary policy has succeeded in keeping inflation under firm control. The broad exchange rate stability has reinforced confidence and helped reduce euroization, but there is a need to continue allowing day-to-day exchange rate flexibility, consistent with the inflation-targeting regime.

“Financial sector reforms under the program have strengthened the resilience of the sector. It is now in a stronger position to fully support future growth. However, efforts to reduce NPLs need to continue, and reforms of state-owned financial institutions need to be accelerated.

“Serbia’s business environment has strengthened, but impediments to private investment and growth remain. Initiatives to improve property registration and limit parafiscal charges need to be followed through, and efforts are needed to strengthen judicial processes, especially to improve judicial independence and reduce delays in court decisions. Strengthening labor force participation, particularly among women, is also essential.”