{
  "title": "IMF Executive Board Concludes 2021 Article IV Consultation with Republic of Serbia and Approves a 30-Month Policy Coordination Instrument",
  "publication": "IMF News, June 18, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/06/21/pr21189-serbia-imf-executive-board-concludes-2021-article-iv-consultation-and-approves-30-month-pci",
  "canonical": "https://www.imf.org/en/news/articles/2021/06/21/pr21189-serbia-imf-executive-board-concludes-2021-article-iv-consultation-and-approves-30-month-pci",
  "overlayPath": "/en/news/articles/2021/06/21/pr21189-serbia-imf-executive-board-concludes-2021-article-iv-consultation-and-approves-30-month-pci/index.md",
  "summary": "Serbia’s economic recovery is expected to continue in 2021, supported by ongoing measures to boost the economy.",
  "publishDate": "2021-06-18",
  "sections": [
    {
      "heading": "Economic outlook and near-term assessment",
      "content": "- Serbia’s economic recovery is expected to continue in 2021, supported by ongoing measures to boost the economy.\n- The economic contraction in 2020 is estimated at around 1 percent.\n- Real GDP growth is projected to reach 6 percent in 2021 (noting strong 1Q2021 data and a fast vaccine rollout).\n- Over the medium-term, growth is projected to gradually converge to its potential of 4 percent.\n- Inflation is projected to remain in the lower half of the inflation target band.\n- The current account deficit is projected at about 5 percent of GDP and to remain fully covered by FDI.\n- Risks:\n  - Downside: New waves of infections and new variants of the virus could lead to higher fiscal and external financing needs.\n  - Upside: Stronger-than-expected impact of the fast vaccine rollout domestically and globally could provide an upside."
    },
    {
      "heading": "Policy Coordination Instrument (PCI) and program design",
      "content": "- The Executive Board approved a new 30-month Policy Coordination Instrument (PCI).\n- The new PCI:\n  - Builds on the 2018 PCI successfully completed in January 2021.\n  - Aims at supporting recovery from the pandemic, maintaining macroeconomic stability, anchoring the medium-term fiscal policy framework, and pushing ahead with structural reforms to deliver more inclusive and sustainable growth.\n  - Involves no use of IMF financial resources.\n  - Will have program reviews on a semiannual fixed schedule.\n  - Successful completion of program reviews will help signal Serbia’s commitment to continued strong macroeconomic policies and structural reforms."
    },
    {
      "heading": "Fiscal, monetary, and financial sector assessment",
      "content": "- Fiscal policy:\n  - The supplementary budget for 2021 (adopted in April) boosts capital expenditure and extends policy support to households and corporates.\n  - Fiscal policy is appropriately focused on providing support to the economy.\n  - Recommendation: Once recovery gains momentum, rebuild policy buffers and anchor them by a new fiscal rule.\n  - Prioritize productive capital investments, moderate growth of public wages and pensions, and further enhance fiscal management.\n- Monetary policy:\n  - Monetary policy is accommodative, with inflation under control.\n  - Extraordinary monetary and financial sector policy measures have supported economic activity through the pandemic.\n  - The banking system remains liquid, well capitalized, and stable; continued close monitoring of banking sector risks is critical as crisis support measures expire.\n- Financial deepening and markets:\n  - Authorities’ plans to encourage dinarization, improve capital markets, and access development finance are welcomed.\n  - Developing domestic capital markets would enhance financial deepening and support medium-term growth.\n  - Some Directors suggested greater exchange rate flexibility could raise awareness of risks of unhedged FX loans and underscored the importance of developing hedging markets; a few Directors noted the potentially limited role of a more flexible exchange rate as a shock absorber."
    },
    {
      "heading": "Structural and institutional reform priorities",
      "content": "- Further structural and institutional reforms are needed to underpin high, inclusive, and greener growth and accelerate income convergence with the EU.\n- Priority areas highlighted:\n  - Strengthening governance and management of state-owned enterprises (SOEs); welcome for the new ownership and governance strategy.\n  - Improve the business environment to attract investment.\n  - Strengthen the rule of law, improve judicial system efficiency, and curb corruption.\n  - Invest in a green and digital economy to raise productivity, support job creation, and enhance economic and environmental resilience.\n  - Reform labor taxation and social protection to support inclusion.\n  - Promote green growth and enhance the social safety net to support the recovery and sustainable development."
    },
    {
      "heading": "Executive Board assessment and guidance",
      "content": "- Directors commended the authorities’ strong policy response that cushioned the pandemic’s impact and set the stage for recovery.\n- Continued policy support is necessary given high uncertainty, while safeguarding macroeconomic and financial stability.\n- Preserve flexibility in the policy response and avoid premature withdrawal of support; have a contingency plan.\n- Any additional assistance should be targeted, consider narrowing fiscal room, and maintain transparency and accountability."
    },
    {
      "heading": "Selected economic and social indicators (from Table 1)",
      "content": "- Real GDP (percent change):\n  - 2018: 4.5\n  - 2019: 4.2\n  - 2020: -1.5\n  - 2021 (Est.): -1.0\n  - 2021 (Proj.): 5.0\n  - 2021 (CR 21/8 Proj.): 6.0\n- Real domestic demand (absorption) (percent change):\n  - 2018: 6.5\n  - 2019: 6.2\n  - 2020: -1.7\n  - 2021 (Est.): 0.0\n  - 2021 (Proj.): 6.7\n  - 2021 (CR 21/8 Proj.): 5.8\n- Consumer prices (average):\n  - 2018: 2.0\n  - 2019: 1.9\n  - 2020: 1.7\n  - 2021 (Est.): 1.6\n  - 2021 (Proj.): 2.5\n  - 2021 (CR 21/8 Proj.): 2.3\n- Unemployment rate (working age 15-64) (percent):\n  - 2018: 3.5\n  - 2019: 1.8\n  - 2020: 2.7\n  - 2021 (Est.): 2.9\n- Nominal GDP (in billions of dinars):\n  - 2018: 5,073\n  - 2019: 5,418\n  - 2020: 5,524\n  - 2021 (Est.): 5,464\n  - 2021 (Proj.): 5,940\n  - 2021 (CR 21/8 Proj.): 5,942\n  - 2022 (Proj.): 6,375\n  - 2023 (Proj.): 6,389\n  - (other series in table: 6,868)\n- General government finances (percent of GDP):\n  - Revenue:\n    - 2018: 41.5\n    - 2019: 42.1\n    - 2020: 40.3\n    - 2021 (Est.): 41.3\n    - 2021 (Proj.): 40.8\n    - 2021 (CR 21/8 Proj.): 41.7\n  - Expenditure:\n    - 2018: 40.9\n    - 2019: 42.3\n    - 2020: 49.2\n    - 2021 (Est.): 49.4\n    - 2021 (Proj.): 43.8\n    - 2021 (CR 21/8 Proj.): 48.7\n  - Current:\n    - 2018: 36.4\n    - 2019: 36.9\n    - 2020: 37.6\n    - 2021 (Est.): 36.7\n    - 2021 (Proj.): 37.2\n    - 2021 (CR 21/8 Proj.): 36.5\n  - Capital and net lending:\n    - 2018: 4.1\n    - 2019: 5.1\n    - 2020: 5.9\n    - 2021 (Est.): 7.6\n    - 2021 (Proj.): 6.8\n  - Amortization of called guarantees:\n    - 2018: 0.4\n    - 2019: 0.2\n    - 2020: 0.1\n    - 2021 (Est.): 0.3\n  - Fiscal balance:\n    - 2018: 0.6\n    - 2019: -0.2\n    - 2020: -8.9\n    - 2021 (Est.): -8.1\n    - 2021 (Proj.): -3.0\n    - 2021 (CR 21/8 Proj.): -6.9\n  - Primary fiscal balance (cash basis):\n    - 2018: 2.8\n    - 2019: -6.1\n    - 2020: -1.1\n    - 2021 (Est.): -5.0\n  - Structural primary fiscal balance:\n    - 2018: 1.5\n    - 2019: 1.2\n    - 2020: 0.5\n    - 2021 (Est.): -0.3\n    - 2021 (Proj.): -1.6\n- Gross debt (percent of GDP):\n  - 2018: 54.4\n  - 2019: 52.8\n  - 2020: 59.1\n  - 2021 (Est.): 58.4\n  - 2021 (Proj.): 57.7\n  - 2021 (CR 21/8 Proj.): 60.3\n  - (other series: 55.5, 58.9, 56.0)\n- Monetary sector (end of period 12-month change, percent):\n  - Money (M1): 2018: 20.1; 2019: 16.3; 2020: 24.2; 2021 (Est.): 36.3; 2021 (Proj.): 7.5; 2021 (CR 21/8 Proj.): 11.8\n  - Broad money (M2): 2018: 15.0; 2019: 8.8; 2020: 12.7; 2021 (Est.): 18.4; 2021 (Proj.): 7.1; 2021 (CR 21/8 Proj.): 9.1\n  - Domestic credit to non-government (period average, percent): 10.1, 10.6, 12.0, 5.6, 6.6\n- Balance of payments (percent of GDP):\n  - Current account balance:\n    - 2018: -4.8\n    - 2019: -5.7\n    - 2020: -4.3\n    - 2021 (Est.): -5.8\n    - 2021 (Proj.): -5.1\n    - 2021 (CR 21/8 Proj.): -5.6\n    - (other series: -4.9)\n  - Exports of goods:\n    - 2018: 35.2\n    - 2019: 35.7\n    - 2020: 32.6\n    - 2021 (Est.): 34.5\n    - 2021 (Proj.): 33.8\n    - 2021 (CR 21/8 Proj.): 39.3\n    - (other series: 36.8)\n  - Imports of goods:\n    - 2018: -47.1\n    - 2019: -47.9\n    - 2020: -43.5\n    - 2021 (Est.): -45.7\n    - 2021 (Proj.): -46.5\n    - 2021 (CR 21/8 Proj.): -50.4\n    - (other series: -49.4, -51.0, -51.3)\n  - Trade of goods balance:\n    - 2018: -11.9\n    - 2019: -12.2\n    - 2020: -10.9\n    - 2021 (Est.): -11.2\n    - 2021 (Proj.): -12.7\n    - 2021 (CR 21/8 Proj.): -12.6\n- Capital and financial account balance:\n  - 2018: 5.2\n  - 2019: 6.3\n- External debt (percent of GDP):\n  - 2018: 66.1\n  - 2019: 65.5\n  - 2020: 67.4\n  - 2021 (Est.): 70.9\n  - 2021 (Proj.): 64.3\n  - 2021 (CR 21/8 Proj.): 70.6\n  - (other series: 61.4, 68.0, 64.8)\n  - Private external debt (percent of GDP): 30.9, 30.8, 29.9, 34.1, 28.8, 31.8, 27.3, 30.2, 28.5\n- Gross official reserves (in billions of euro):\n  - 2018: 11.3\n  - 2019: 13.4\n  - 2020: 13.5\n  - 2021 (Est.): 13.7\n  - 2021 (Proj.): 15.2\n  - 2021 (CR 21/8 Proj.): 14.3\n  - (other series: 16.1, 16.9)\n- Gross official reserves (in months of prospective imports):\n  - 2018: 4.8\n  - 2019: 6.1\n  - 2020: 5.5\n  - 2021 (Est.): 5.4\n  - 2021 (Proj.): 4.7\n- Gross official reserves (percent of short-term debt):\n  - 2018: 195.3\n  - 2019: 408.9\n  - 2020: 204.0\n  - 2021 (Est.): 412.3\n  - 2021 (Proj.): 209.8\n  - 2021 (CR 21/8 Proj.): 463.6\n  - (other series: 217.9, 493.1, 516.3)\n- Gross official reserves (percent of broad money, M2):\n  - 2018: 52.2\n  - 2019: 57.8\n  - 2020: 56.8\n  - 2021 (Est.): 54.6\n  - 2021 (Proj.): 53.2\n  - 2021 (CR 21/8 Proj.): 60.1\n  - (other series: 58.7)\n- Risk-weighted metric (percent of risk-weighted metric) 8/:\n  - 2018: 111.2\n  - 2019: 126.2\n  - 2020: 122.0\n  - 2021 (Est.): 126.0\n  - 2021 (Proj.): 120.7\n  - 2021 (CR 21/8 Proj.): 129.0\n  - (other series: 119.2, 130.3, 129.6)\n- Exchange rate (dinar/euro, period average):\n  - 2018: 118.3\n  - 2019: 117.9\n  - 2020: 117.6\n- Social indicators:\n  - Per capita GDP (in US$): 7,252; 7,392; 7,723; 7,646; 8,442; 8,878; 9,653; 9,629; 10,368\n  - Real GDP per capita (percent change): -0.4; 6.4; 4.9\n  - Population (in million): 7.0; 6.9"
    },
    {
      "heading": "Selected statements",
      "content": "- Tao Zhang, Deputy Managing Director and Acting Chair, emphasized:\n  - Serbia has coped relatively well with the COVID-19 pandemic.\n  - Sustaining a solid economic recovery should be a policy priority given uncertainty.\n  - Scaling up public investment—including in green infrastructure—should support near-term growth.\n  - Further structural and institutional reforms, green growth promotion, and enhancing social safety nets were stressed.\n\nPress Release No. 21/189, June 18, 2021 — IMF Communications Department\n\n---\n\n\n References\n\n- Tao Zhang\n- Republic of Serbia and the IMF\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/06/21/pr21189-serbia-imf-executive-board-concludes-2021-article-iv-consultation-and-approves-30-month-pci"
    }
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    "Published: June 18, 2021",
    "Serbia’s economic recovery is expected to continue in 2021, supported by ongoing measures to boost the economy.",
    "The economic contraction in 2020 is estimated at around 1 percent.",
    "Real GDP growth is projected to reach 6 percent in 2021 (noting strong 1Q2021 data and a fast vaccine rollout).",
    "Over the medium-term, growth is projected to gradually converge to its potential of 4 percent.",
    "Inflation is projected to remain in the lower half of the inflation target band.",
    "The current account deficit is projected at about 5 percent of GDP and to remain fully covered by FDI.",
    "Risks:",
    "The Executive Board approved a new 30-month Policy Coordination Instrument (PCI).",
    "The new PCI:",
    "Fiscal policy:",
    "Monetary policy:",
    "Financial deepening and markets:",
    "Further structural and institutional reforms are needed to underpin high, inclusive, and greener growth and accelerate income convergence with the EU.",
    "Priority areas highlighted:",
    "Directors commended the authorities’ strong policy response that cushioned the pandemic’s impact and set the stage for recovery.",
    "Continued policy support is necessary given high uncertainty, while safeguarding macroeconomic and financial stability.",
    "Preserve flexibility in the policy response and avoid premature withdrawal of support; have a contingency plan.",
    "Any additional assistance should be targeted, consider narrowing fiscal room, and maintain transparency and accountability.",
    "Real GDP (percent change):",
    "Real domestic demand (absorption) (percent change):",
    "Consumer prices (average):",
    "Unemployment rate (working age 15-64) (percent):",
    "Nominal GDP (in billions of dinars):",
    "General government finances (percent of GDP):",
    "Gross debt (percent of GDP):",
    "Monetary sector (end of period 12-month change, percent):",
    "Balance of payments (percent of GDP):",
    "Capital and financial account balance:",
    "External debt (percent of GDP):",
    "Gross official reserves (in billions of euro):",
    "Gross official reserves (in months of prospective imports):",
    "Gross official reserves (percent of short-term debt):",
    "Gross official reserves (percent of broad money, M2):",
    "Risk-weighted metric (percent of risk-weighted metric) 8/:",
    "Exchange rate (dinar/euro, period average):",
    "Social indicators:",
    "Tao Zhang, Deputy Managing Director and Acting Chair, emphasized:",
    "[Tao Zhang](https://www.imf.org/en/About/senior-officials/Bios/tao-zhang)",
    "[Republic of Serbia and the IMF](http://www.imf.org/external/country/SRB/index.htm)",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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