## IMF Policy Support Program Helps Serbia Advance Reforms and Cope with COVID-19 _IMF News, January 8, 2021_ ## Source details **Canonical URL:** [IMF Policy Support Program Helps Serbia Advance Reforms and Cope with COVID-19](https://www.imf.org/en/news/articles/2021/01/07/na01082021-imf-policy-support-program-helps-serbia-advance-reforms-and-cope-with-covid19) ## Other formats - [Markdown version](/en/news/articles/2021/01/07/na01082021-imf-policy-support-program-helps-serbia-advance-reforms-and-cope-with-covid19/index.md) - [Structured JSON version](/en/news/articles/2021/01/07/na01082021-imf-policy-support-program-helps-serbia-advance-reforms-and-cope-with-covid19/index.json) - [Bundle manifest](/en/news/articles/2021/01/07/na01082021-imf-policy-support-program-helps-serbia-advance-reforms-and-cope-with-covid19/bundle-manifest.json) ## Bibliographic details - Published: January 8, 2021 --- ### Overview - Serbia’s economic reform program supported by the IMF since July 2018 will come to a close at the end of January. - The Policy Coordination Instrument (PCI) provided policy advice but no IMF financing. - The PCI’s key goals: foster inclusive growth, maintain financial stability, and advance structural reforms, including sustaining earlier fiscal improvement. ### Program assessment and adjustments - The PCI was broadly on track when COVID-19 hit, but objectives were adjusted to reflect pandemic-related challenges. - Last spring, the PCI’s focus shifted to supporting the economy through the crisis and managing risks. - Progress and delays: - Achieved: modernizing tax administration; strengthening public investment frameworks; monitoring and managing fiscal risks. - Delayed or not implemented: reforms to strengthen governance of state-owned enterprises; development of capital markets; public employment and public wage reforms. ### COVID-19 policy response and economic impact - Fiscal and monetary measures implemented with IMF support included: - A fiscal package among the largest in emerging Europe, including increased healthcare spending, wage subsidies, universal cash transfers, and a state guarantee scheme for bank loans to small and medium-sized enterprises. - Central bank actions: cut key policy interest rate, injected liquidity into the banking system, introduced a moratorium on bank loan repayments. - Serbia avoided IMF financial assistance during the pandemic by meeting financing needs in markets and via other institutions. - Economic impact and projection notes: - Authorities’ estimate for real GDP contraction in 2020: 1.1 percent. - Pre-crisis momentum: growth of 5.2 percent in Q1 2020 compared with Q1 2019. - Despite the relatively small 2020 contraction, real GDP in 2022 is expected to be 4 percent points below pre-COVID-19 projections. ### Financing and external position - Fiscal outcome and financing: - Fiscal deficit in 2020 rose to almost 9 percent of GDP. - Serbia returned to international markets in early May 2020 with a EUR 2 billion Eurobond. - In December 2020, a 10-year Eurobond worth $1.2 billion was issued at a relatively low yield. - Other financing developments: - Local banks’ appetite for government securities recovered since May 2020. - International financial institutions other than the IMF offered sizable financing and bilateral loans. - From an external perspective, balance of payment needs remained manageable despite sharp contractions in remittances and foreign direct investment. - Foreign reserves remained broadly stable during 2020. ### Main economic challenges going forward - Sustain a solid economic recovery in 2021 as most crisis measures expire. - High uncertainty about the pandemic’s course and delayed effects on the financial health of firms and households; additional support measures for the economy and vulnerable groups may become necessary. - Structural reform priorities: - Accelerate reforms to transform Serbia into a dynamic, private sector-driven market economy and prepare for EU Single Market entry. - Improve the quality of institutions and governance, including well-governed and managed state-owned enterprises. - Address infrastructure gaps to support competitiveness, foreign investment, and integration into regional and global value chains. - Fight informality to facilitate doing business and generate higher fiscal revenues. - Strengthen commitment to fight corruption, enhance the rule of law, and improve court system efficiency to improve the business climate and foster long-term growth. ### IMF engagement going forward - Serbian authorities expressed interest in a new IMF program and indicated they do not need IMF financing. - A successor PCI is possible to support recovery; it would: - Support continuation of policies to strengthen macroeconomic stability and financial sector resilience. - Continue implementation of structural and institutional reforms. - Require agreement on fiscal, monetary, and financial policies and an ambitious reform agenda. - IMF will remain engaged through technical assistance in areas including tax administration reform, public financial management, and fiscal statistics. ### Key statistics and dates (preserved exactly as in source) - July 2018 - end of January - January 8, 2021 - 1.1 percent (real GDP contraction in 2020, authorities’ estimate) - 5.2 percent (growth in Q1 2020 compared with Q1 2019) - 4 percent points (real GDP in 2022 expected to be below pre-COVID-19 projections) - almost 9 percent of GDP (fiscal deficit in 2020) - EUR 2 billion (Eurobond issued in early May 2020) - 10-year (Eurobond tenor issued in December 2020) - $1.2 billion (Eurobond issued in December 2020) *IMF: "IMF Policy Support Program Helps Serbia Advance Reforms and Cope with COVID-19" (January 8, 2021).* --- ## References - [https://www.imf.org/en/News/country-focus](https://www.imf.org/en/News/country-focus) - [PRESS CENTER](http://presscenter.imf.org/) - [Read the report](https://www.imf.org/en/Publications/CR/Issues/2021/01/07/Republic-of-Serbia-Fifth-Review-under-the-Policy-Coordination-Instrument-Press-Release-and-49994) - [Read the press release](https://www.imf.org/en/News/Articles/2021/01/07/pr213-serbia-imf-executive-board-completes-final-review-under-the-policy-coordination-instrument) - [Factsheet: Policy Coordination Instrument](https://www.imf.org/en/About/Factsheets/Sheets/2017/07/25/policy-coordination-instrument) - [The IMF and COVID-19](https://www.imf.org/en/Topics/imf-and-covid19) - [Serbia and the IMF](https://www.imf.org/en/Countries/SRB) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2021/01/07/na01082021-imf-policy-support-program-helps-serbia-advance-reforms-and-cope-with-covid19_