Washington, DC
:
The Executive Board of the International Monetary Fund (IMF) concluded the
Second Review Under the Policy Coordination Instrument (PCI)
[1]
for the Republic of Serbia.
The PCI was approved on June 18, 2021 (see
Press Release No. 21/189
) and aims at supporting the recovery from the pandemic, maintaining
macroeconomic stability, and anchoring the medium-term fiscal policy
framework, while pushing ahead with structural reforms to deliver more
inclusive and sustainable growth.
The war in Ukraine and an energy crisis have disrupted the strong recovery
from the COVID-19 pandemic. Following economic growth of 7.4 percent in
2021, growth in 2022 is projected markedly lower at 3.5 percent, dampened
by the impact of high inflation on consumer demand, curtailed trade with
Russia, and lower external demand. Driven by soaring global food and energy
prices, inflation has increased to 10.4 percent in May 2022, while core
inflation remained lower at 6.3 percent. Specific challenges arose in the
energy sector when shortfalls in domestic electricity production coincided
with rising global energy prices in the 2021-22 winter, increasing total
energy costs by about 2 percent of GDP.
Faced with these new shocks, the authorities acted swiftly to preserve
financial stability, help companies navigate the international sanctions
regime and supply chain disruptions, mitigate the pass-through of high
global commodity prices through regulation, and provide financing for
energy imports. The authorities have also started to secure energy supply
and address the medium-term reform needs in the energy sector. Thus far,
higher than budgeted tax revenue has covered the new spending measures. The
monetary policy rate has been increased three times since April in response
to continued high inflation.
Risks to the near-term outlook remain elevated and mostly to the downside.
They include a potentially prolonged war in Ukraine with further pressures
on energy and commodity prices, supply chain disruptions, and lower
external demand, as well as continued production shortfalls in the energy
sector.
Policy priorities have shifted again to supporting the economy in a crisis
situation, while the economic policy objectives supported by the PCI remain
an appropriate anchor. Provided that global inflation moderates, inflation
should return to within the NBS target band over the medium term.
At the conclusion of the Board discussion on the second review of the PCI
for Serbia, Mr. Kenji Okamura, Deputy Managing Director and Acting Chair
made the following statement:
“Serbia has demonstrated its resilience during the Covid-19 pandemic, but
the war in Ukraine, high inflation, and the energy crisis pose new
challenges. The authorities’ policies have helped mitigate the immediate
impact of these shocks and preserved macro-financial stability.
Nevertheless, the near-term outlook is subject to downside risks and high
uncertainty.
“Supported by strong revenue collection, the fiscal deficit target of 3
percent of GDP for 2022 remains appropriate and feasible. Fiscal support
for the energy sector in the past winter amidst soaring import prices and
electricity production outages helped maintain energy supply. Should
economic disruptions warrant further support to affected groups or
activities, it should take the form of targeted measures and be
accommodated through spending reprioritization.
“Reforms of the energy sector are urgently needed, including to restore
reliable supply and ensure cost recovery. A strategy for the state-owned
power company Elektroprivreda Srbije (EPS), and timely adoption of the
National Climate and Energy Plan will provide an essential framework for
energy investments in particular in renewable sources.
“Amidst ongoing global and domestic inflationary pressures, monetary policy
tightening has rightly continued to curb inflation expectations and help
bring inflation back within the inflation band over the policy horizon.
“Structural reforms should continue to underpin medium-term growth. The new
fiscal rules, expected to be launched with the 2023 budget, will provide an
important anchor for medium-term fiscal discipline. The planned primary
dealer system will support capital market development.”
[1]
The PCI is available to all IMF members that do not need Fund
financial resources at the time of approval. It is designed for
countries seeking to demonstrate commitment to a reform agenda or
to unlock and coordinate financing from other official creditors or
private investors
|
Table 1. Serbia: Selected Economic and Social
Indicators, 2018–2024
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2018
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2019
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2020
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2021
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2022
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2023
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2024
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CR 21/272
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Prel.
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CR
21/272
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Proj.
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CR
21/272
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Proj.
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Proj.
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Real sector
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Real GDP
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4.5
|
4.3
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-0.9
|
6.5
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7.4
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|
4.5
|
3.5
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|
4.5
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4.0
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4.0
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Real domestic demand (absorption)
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6.5
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6.3
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-0.9
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5.1
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8.5
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4.9
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3.6
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5.1
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4.7
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4.8
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Consumer prices (average)
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2.0
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1.9
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1.6
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4.0
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4.1
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4.9
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9.0
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3.5
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5.9
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3.7
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Consumer prices (end of period)
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2.0
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1.9
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1.3
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7.0
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7.9
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2.5
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8.0
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3.0
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4.3
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3.7
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GDP deflator
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2.0
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2.4
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2.4
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4.9
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6.1
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4.7
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6.8
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3.8
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7.0
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5.2
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Unemployment rate (in percent) 1/
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14.1
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11.6
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10.1
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…
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…
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…
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…
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…
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…
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…
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Nominal GDP (in billions of dinars)
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5,073
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5,422
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5,502
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6,147
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6,269
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6,725
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6,931
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7,295
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7,711
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8,437
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General government finances
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Revenue 2/
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41.5
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42.0
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41.0
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43.6
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43.3
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41.7
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41.3
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41.7
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41.6
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41.7
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Expenditure 2/
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40.9
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42.2
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49.0
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48.5
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47.4
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44.7
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44.3
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43.2
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43.1
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42.9
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Current 2/
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36.4
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36.9
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42.8
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40.3
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39.0
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37.0
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37.5
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36.2
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36.2
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35.9
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Capital and net lending
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4.1
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5.1
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6.1
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8.1
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8.3
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7.4
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6.8
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6.8
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6.6
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6.7
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Amortization of called guarantees
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0.4
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0.2
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0.1
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0.1
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0.1
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0.2
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0.0
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0.1
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0.3
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0.2
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Fiscal balance 3/
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0.6
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-0.2
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-8.0
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-5.0
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-4.1
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-3.0
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-3.0
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-1.5
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-1.5
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-1.1
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Primary fiscal balance (cash basis)
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2.8
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1.8
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-6.0
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-3.1
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-2.4
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-1.2
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-1.3
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0.3
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0.8
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0.6
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Structural primary fiscal balance 4/
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2.9
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1.5
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-4.0
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-3.4
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-2.5
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-1.7
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-1.0
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0.2
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0.7
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0.5
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Gross debt /5
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54.4
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52.8
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57.9
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58.3
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57.2
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56.5
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55.1
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53.9
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50.8
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47.2
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Monetary sector
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Money (M1)
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20.1
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16.3
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36.3
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11.4
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14.5
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9.0
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11.2
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8.6
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11.2
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8.5
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Broad money (M2)
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15.0
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8.8
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18.4
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10.6
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13.0
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8.4
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11.8
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8.1
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7.3
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6.0
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Domestic credit to non-government 6/
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10.1
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9.5
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12.0
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5.8
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9.9
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5.1
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13.5
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4.3
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7.5
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6.6
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Interest rates (dinar)
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NBS key policy rate
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3.1
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2.3
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1.0
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…
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1.0
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…
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…
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…
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…
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…
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Interest rate on new FX and FX-indexed loans
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2.8
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3.1
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3.0
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…
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3.0
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…
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…
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…
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…
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…
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Balance of payments
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Current account balance
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-4.8
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-6.9
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-4.1
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-4.1
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-4.4
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-4.3
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-6.1
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-4.3
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-5.7
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-6.0
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Exports of goods
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35.2
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35.7
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34.4
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39.1
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38.9
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39.2
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38.7
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39.0
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36.7
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36.0
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Imports of goods
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-47.1
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-47.9
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-45.5
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-49.5
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-50.0
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-49.5
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-51.4
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-49.3
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-48.6
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-47.2
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Trade of goods balance
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-11.9
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-12.2
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-11.1
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-10.4
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-11.1
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-10.3
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-12.7
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-10.3
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-11.9
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-11.2
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Capital and financial account balance
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6.7
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10.6
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5.0
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11.1
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8.7
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5.9
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3.2
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6.7
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7.2
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6.9
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External debt (percent of GDP) 7/
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66.1
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65.7
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70.3
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68.4
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71.3
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64.8
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66.2
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62.1
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62.3
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58.0
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of which:
Private external debt
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30.9
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31.3
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33.8
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31.1
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32.6
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29.0
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29.0
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27.2
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26.4
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24.4
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Gross official reserves (in billions of euro)
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11.3
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13.4
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13.5
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17.1
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16.5
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18.0
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14.7
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19.5
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15.7
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16.4
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(in months of prospective imports)
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4.8
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6.1
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4.9
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6.0
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5.3
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5.9
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4.4
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5.9
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4.4
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4.3
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(percent of short-term debt)
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195.3
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417.2
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420.7
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523.2
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513.1
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551.4
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458.9
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594.8
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489.5
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510.5
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(percent of broad money, M2)
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52.2
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57.7
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57.3
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65.7
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61.4
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63.6
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49.7
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63.9
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47.5
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45.2
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(percent of risk-weighted metric) 8/
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111.2
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126.2
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125.9
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139.3
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134.0
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138.7
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114.3
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142.4
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113.9
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112.8
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Exchange rate (dinar/euro, period average)
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118.3
|
117.9
|
117.6
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…
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117.6
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…
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…
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…
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…
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…
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REER (annual average change, in percent; + indicates
appreciation)
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2.8
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1.0
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1.5
|
…
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1.4
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…
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…
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…
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…
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…
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Social indicators
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Per capita GDP (in US$)
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7,252
|
7,397
|
7,700
|
9,012
|
9,178
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|
9,940
|
9,597
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10,904
|
10,883
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|
12,145
|
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Real GDP per capita (percent change)
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5.1
|
4.6
|
-0.4
|
6.9
|
8.3
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|
4.9
|
4.0
|
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4.9
|
4.4
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4.4
|
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Population (in million)
|
|
7.0
|
7.0
|
6.9
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6.9
|
6.9
|
|
6.9
|
6.8
|
|
6.8
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6.8
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|
6.8
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Sources: Serbian authorities; and IMF staff estimates and
projections.
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1/ Unemployment rate for working age population (15-64).
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2/ Includes employer contributions.
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3/ Includes amortization of called guarantees.
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4/ Primary fiscal balance adjusted for the automatic
effects of the output gap both on revenue and spending as
well as one-offs. The calculation of the
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structural balance has been revised to include temporary
one-off measures enacted to respond to the pandemic.
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5/ Excludes state guarantees on bank loans under the credit
guarantee scheme introduced in response to the COVID-19
crisis,
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estimated at 1.1 percent of GDP as of August 15 th, 2021.
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6/ At constant exchange rates.
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7/ After CR19/369, domestic securities held by
non-residents are included in external debt. Historical
data were updated since 2015.
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8/ The risk-weighted metric is IMF's ARA metric for the
fixed exchange rate. Serbia was reclassified as stabilized
exchange rate regime in 2019.
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