IMF Staff Completes Review Mission to Serbia
IMF News, October 15, 2019
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- IMF Staff Completes Review Mission to Serbia
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Bibliographic details
- Published: October 15, 2019
Mission overview
- Press Release No. 19/375; October 15, 2019.
- IMF staff mission led by Jan Kees Martijn visited Belgrade during October 3 – 15, 2019 to discuss the third review under Serbia’s Policy Coordination Instrument (PCI).
- The mission reached staff-level agreement on policies needed to complete the third review under the PCI; 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 December.
- End-of-mission statement notes that end-September 2019 quantitative targets are expected to have been met.
Economic outlook and labor market
- Serbia’s economic performance described as robust.
- Unemployment has fallen to record-low levels.
- Real GDP growth projections:
- 3.5 percent in 2019
- 4 percent in 2020
- Growth is 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 is assessed as appropriate given low inflationary pressures.
Fiscal performance and budget framework
- Strong fiscal performance continued in the first three quarters of 2019.
- The general government recorded a surplus during January-August 2019.
- Public debt continues to decline.
- Yields on government bonds have reached historically-low levels.
- Government actions:
- Adopted a supplementary budget allowing for additional capital spending, a one-off payment to pensioners, and increases of public sector wages.
- Agreed key parameters of the 2020 budget targeting an overall fiscal deficit of 0.5 percent of GDP.
- Plans to reintroduce pension indexation in 2020 to ensure a more rules-based system.
- Current plans to introduce a new set of fiscal rules for 2021 onwards to help preserve gains and ensure fiscal sustainability.
- Fiscal risks and monitoring:
- Supplementary measures do not jeopardize fiscal sustainability but authorities should closely monitor budget execution through the end of the year to ensure the deficit stays within the program ceiling.
- Wages: while larger increases to retain specific worker groups are justified, the overall wage bill is now growing faster than nominal GDP for a second year in a row, deviating from the authorities’ commitments.
Monetary policy and financial sector stability
- 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.
- Recommended priorities to enhance stability and growth:
- Develop capital markets.
- Continue to promote dinarization.
Structural reforms and governance
- Structural reforms continue to advance, albeit with delays in certain areas.
- Progress reported in:
- Reforming tax administration.
- Strengthening public investment management frameworks.
- Privatizing Komercijalna.
- Areas needing stronger commitment and further action:
- Reforms of the public wage system and public employment framework, which have faced substantial delays.
- Strengthening SOE management and corporate governance.
- A thorough assessment of electricity tariffs to ensure full-cost recovery.
Closing
- The mission expressed gratitude for the authorities’ hospitality and close cooperation.
IMF Staff statement as of October 15, 2019.
Content in this bundle
- Saopštenje za štampu br. 19/375