IMF Executive Board Completes the Final Review Under the Policy Coordination Instrument for the Republic of Serbia
IMF News, January 8, 2021
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- Published: January 8, 2021
Program status and implementation
- The Executive Board concluded the Fifth Review Under the Policy Coordination Instrument (PCI).
- The decision was taken without a meeting.
- This was the final review under the PCI that was approved on July 18, 2018.
- Program implementation has remained on track throughout the PCI.
- The policy program has facilitated macroeconomic and financial stability, while advancing an ambitious reform agenda to foster rapid growth, job creation, and improved living standards.
- In response to the COVID-19 pandemic, program priorities shifted to supporting the economy and people through the crisis.
Economic outlook and risks
- Serbia’s real GDP growth is projected to contract by 1.5 percent in 2020 before rebounding to 5 percent in 2021.
- Due to the pandemic, Serbia’s real GDP is projected to contract by 1.5 percent in 2020 and recover in 2021 with growth at 5 percent.
- Economic activity picked up in the third quarter of 2020 following the sharp contraction during the previous quarter.
- Policy measures—including monetary policy support and a large fiscal package worth about 9 percent of GDP—have played an important role in supporting the economy.
- The recent acceleration in infection rates in Serbia and its major trading partners could negatively impact the nascent recovery; a stronger-than-expected infection wave presents a clear downside risk to the outlook.
- Inflation remains close to the lower limit of the National Bank of Serbia’s inflation band.
Fiscal policy stance and recommendations
- The fiscal deficit in 2021 is planned at 3 percent of GDP.
- The 2021 budget appropriately balances support for economic recovery with fiscal responsibility.
- The 2021 deficit would help ensure that public debt in percent of GDP resumes a declining path, while also creating enough space to support the recovery, including through higher public investments.
- Within this envelope, increases in public sector wages should be limited and pension increases are expected to follow the agreed Swiss formula.
- The unwinding of support measures could be made more gradual if further shocks materialize.
Monetary and financial sector developments
- The quantitative targets for end-September 2020 were met and sufficient progress was made in meeting the structural reform targets.
- Money (M1) end-of-period 12-month change: 24.2 (2020), 12.2 (2021 proj.), 7.5 (2022 proj.), 8.7 (CR 20/270).
- Broad money (M2) end-of-period 12-month change: 12.7 (2020), 9.0 (2021 proj.), 7.1 (2022 proj.), 7.3 (CR 20/270).
- Domestic credit to non-government (end-of-period 12-month change): 10.6 (2020), 8.4 (2021 proj.), 7.8 (2022 proj.).
- Gross official reserves (in billions of euro): 13.2 (2019), 13.6 (2020), 13.7 (2021 proj.), 14.3 (CR 20/270).
- Gross official reserves (in months of prospective imports): 4.7.
- Gross official reserves (percent of short-term debt): 247.9 (2019), 204.0 (2020), 255.8 (2021 proj.), 209.8 (CR 20/270), 217.9 (later entry).
- Gross official reserves (percent of broad money, M2): 57.2 (2019), 56.8 (2020), 54.8 (2021 proj.), 54.6 (CR 20/270).
- Gross official reserves (percent of risk-weighted metric): 180.2 (2019), 120.7 (2020), 119.2 (2021 proj.).
Structural and medium-term priorities
- Going forward, it will be important for Serbia to build on its achievements under the current program by continuing to pursue structural and institutional reforms that will deliver faster convergence of incomes with EU countries.
- Medium-term priorities include capital market development and improving governance, including strengthening the rule of law.
Key statistics (selected figures from Table 1)
- Real GDP (percent change): 3.3 (2016), 2.1 (2017), 4.5 (2018), 4.2 (2019), -3.0 (2020 CR), -1.5 (2020 proj.), 6.0 (2021 CR), 5.0 (2021 proj.).
- Real domestic demand (absorption) (percent change): 1.5 (2016), 3.9 (2017), 6.5 (2018), 6.2 (2019), -1.8 (2020 CR), -1.7 (2020 proj.), 8.0 (2021 CR), 6.7 (2021 proj.), 4.6 (2022).
- Consumer prices (average): 1.1 (2016), 3.1 (2017), 2.0 (2018), 1.9 (2019), 1.7 (2020), 2.3 (2021).
- Nominal GDP (in billions of dinars): 4,528 (2016), 4,761 (2017), 5,073 (2018), 5,418 (2019), 5,448 (2020), 5,524 (2021), 5,907 (2022), 5,940 (CR 20/270), 6,375 (later entry).
- General government revenue (percent of GDP): 40.7 (2016), 41.5 (2017), 42.1 (2018), 38.2 (2019), 40.3 (2020), 41.1 (2021), 40.8 (2022), 41.3 (CR 20/270).
- General government expenditure (percent of GDP): 41.9 (2016), 40.4 (2017), 40.9 (2018), 42.3 (2019), 46.8 (2020), 49.2 (2021), 43.2 (2022), 43.8 (CR 20/270), 42.8 (later entry).
- Current expenditure (percent of GDP): 37.9 (2016), 36.7 (2017), 36.4 (2018), 36.9 (2019), 43.1 (2020), 37.5 (2021), 37.6 (2022).
- Capital and net lending (percent of GDP): 3.2 (2016), 4.1 (2017), 5.1 (2018), 4.3 (2019), 5.9 (2020), 5.3 (2021), 5.8 (2022).
- Fiscal balance (percent of GDP): -1.2 (2016), -0.2 (2017), -8.6 (2018), -8.9 (2019), -2.0 (2020).
- Primary fiscal balance (cash basis) (percent of GDP): 3.6 (2016), 2.8 (2017), 1.8 (2018), -6.6 (2019), -6.9 (2020), -0.1 (2021), -1.1 (2022).
- Structural primary fiscal balance: 3.7 (2016), 1.6 (2017), 1.2 (2018), 0.5 (2019).
- Gross debt (percent of GDP): 68.8 (2016), 58.6 (2017), 54.4 (2018), 52.8 (2019), 59.8 (2020), 59.1 (2021), 57.0 (2022), 57.7 (CR 20/270), 55.5 (later entry).
- Current account balance (percent of GDP): -2.9 (2016), -5.2 (2017), -4.8 (2018), -6.4 (2019), -5.7 (2020), -6.5 (2021), -5.8 (2022), -5.6 (CR 20/270).
- Exports of goods (percent of GDP): 34.8 (2016), 35.9 (2017), 35.2 (2018), 35.7 (2019), 33.2 (2020), 32.6 (2021), 33.5 (2022), 33.8 (CR 20/270), 36.8 (later entry).
- Imports of goods (percent of GDP): -43.3 (2016), -46.1 (2017), -47.1 (2018), -47.9 (2019), -44.1 (2020), -43.5 (2021), -46.0 (2022), -46.5 (CR 20/270), -49.4 (later entry).
- External debt (percent of GDP): 76.4 (2016), 66.1 (2017), 68.6 (2018), 67.4 (2019), 65.3 (2020), 64.3 (2021), 61.4 (2022).
- Private external debt (percent of GDP): 29.4 (2016), 29.6 (2017), 30.9 (2018), 31.7 (2019), 30.3 (2020), 29.9 (2021), 29.0 (2022), 28.8 (CR 20/270), 27.3 (later entry).
- Exchange rate (dinar/euro, period average): 123.1 (2016), 121.4 (2017), 118.3 (2018), 117.9 (2019).
- Per capita GDP (in US$): 5,765 (2016), 6,293 (2017), 7,252 (2018), 7,392 (2019), 7,458 (2020), 7,723 (2021), 8,442 (2022), 8,922 (CR 20/270), 9,653 (later entry).
- Real GDP per capita (percent change): 2.6 (2016), -2.6 (2017), 6.4 (2018), 4.9 (2019).
- Population (in million): 7.0 (2016), 6.9 (2017).
Media contact
- IMF Communications Department, MEDIA RELATIONS, PRESS OFFICER: Meera Louis. Phone: +1 202 623-7100 Email: MEDIA@IMF.org @IMFSpokesperson
Press Release No. 21/3, January 8, 2021.
