## IMF Executive Board Concludes 2021 Article IV Consultation with Republic of Serbia and Approves a 30-Month Policy Coordination Instrument _IMF News, June 18, 2021_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2021 Article IV Consultation with Republic of Serbia and Approves a 30-Month Policy Coordination Instrument](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) ## Other formats - [Markdown version](/en/news/articles/2021/06/21/pr21189-serbia-imf-executive-board-concludes-2021-article-iv-consultation-and-approves-30-month-pci/index.md) - [Structured JSON version](/en/news/articles/2021/06/21/pr21189-serbia-imf-executive-board-concludes-2021-article-iv-consultation-and-approves-30-month-pci/index.json) - [Bundle manifest](/en/news/articles/2021/06/21/pr21189-serbia-imf-executive-board-concludes-2021-article-iv-consultation-and-approves-30-month-pci/bundle-manifest.json) ## Bibliographic details - Published: June 18, 2021 --- ### Economic outlook and near-term assessment - 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: - Downside: New waves of infections and new variants of the virus could lead to higher fiscal and external financing needs. - Upside: Stronger-than-expected impact of the fast vaccine rollout domestically and globally could provide an upside. ### Policy Coordination Instrument (PCI) and program design - The Executive Board approved a new 30-month Policy Coordination Instrument (PCI). - The new PCI: - Builds on the 2018 PCI successfully completed in January 2021. - 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. - Involves no use of IMF financial resources. - Will have program reviews on a semiannual fixed schedule. - Successful completion of program reviews will help signal Serbia’s commitment to continued strong macroeconomic policies and structural reforms. ### Fiscal, monetary, and financial sector assessment - Fiscal policy: - The supplementary budget for 2021 (adopted in April) boosts capital expenditure and extends policy support to households and corporates. - Fiscal policy is appropriately focused on providing support to the economy. - Recommendation: Once recovery gains momentum, rebuild policy buffers and anchor them by a new fiscal rule. - Prioritize productive capital investments, moderate growth of public wages and pensions, and further enhance fiscal management. - Monetary policy: - Monetary policy is accommodative, with inflation under control. - Extraordinary monetary and financial sector policy measures have supported economic activity through the pandemic. - The banking system remains liquid, well capitalized, and stable; continued close monitoring of banking sector risks is critical as crisis support measures expire. - Financial deepening and markets: - Authorities’ plans to encourage dinarization, improve capital markets, and access development finance are welcomed. - Developing domestic capital markets would enhance financial deepening and support medium-term growth. - 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. ### Structural and institutional reform priorities - Further structural and institutional reforms are needed to underpin high, inclusive, and greener growth and accelerate income convergence with the EU. - Priority areas highlighted: - Strengthening governance and management of state-owned enterprises (SOEs); welcome for the new ownership and governance strategy. - Improve the business environment to attract investment. - Strengthen the rule of law, improve judicial system efficiency, and curb corruption. - Invest in a green and digital economy to raise productivity, support job creation, and enhance economic and environmental resilience. - Reform labor taxation and social protection to support inclusion. - Promote green growth and enhance the social safety net to support the recovery and sustainable development. ### Executive Board assessment and guidance - 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. ### Selected economic and social indicators (from Table 1) - Real GDP (percent change): - 2018: 4.5 - 2019: 4.2 - 2020: -1.5 - 2021 (Est.): -1.0 - 2021 (Proj.): 5.0 - 2021 (CR 21/8 Proj.): 6.0 - Real domestic demand (absorption) (percent change): - 2018: 6.5 - 2019: 6.2 - 2020: -1.7 - 2021 (Est.): 0.0 - 2021 (Proj.): 6.7 - 2021 (CR 21/8 Proj.): 5.8 - Consumer prices (average): - 2018: 2.0 - 2019: 1.9 - 2020: 1.7 - 2021 (Est.): 1.6 - 2021 (Proj.): 2.5 - 2021 (CR 21/8 Proj.): 2.3 - Unemployment rate (working age 15-64) (percent): - 2018: 3.5 - 2019: 1.8 - 2020: 2.7 - 2021 (Est.): 2.9 - Nominal GDP (in billions of dinars): - 2018: 5,073 - 2019: 5,418 - 2020: 5,524 - 2021 (Est.): 5,464 - 2021 (Proj.): 5,940 - 2021 (CR 21/8 Proj.): 5,942 - 2022 (Proj.): 6,375 - 2023 (Proj.): 6,389 - (other series in table: 6,868) - General government finances (percent of GDP): - Revenue: - 2018: 41.5 - 2019: 42.1 - 2020: 40.3 - 2021 (Est.): 41.3 - 2021 (Proj.): 40.8 - 2021 (CR 21/8 Proj.): 41.7 - Expenditure: - 2018: 40.9 - 2019: 42.3 - 2020: 49.2 - 2021 (Est.): 49.4 - 2021 (Proj.): 43.8 - 2021 (CR 21/8 Proj.): 48.7 - Current: - 2018: 36.4 - 2019: 36.9 - 2020: 37.6 - 2021 (Est.): 36.7 - 2021 (Proj.): 37.2 - 2021 (CR 21/8 Proj.): 36.5 - Capital and net lending: - 2018: 4.1 - 2019: 5.1 - 2020: 5.9 - 2021 (Est.): 7.6 - 2021 (Proj.): 6.8 - Amortization of called guarantees: - 2018: 0.4 - 2019: 0.2 - 2020: 0.1 - 2021 (Est.): 0.3 - Fiscal balance: - 2018: 0.6 - 2019: -0.2 - 2020: -8.9 - 2021 (Est.): -8.1 - 2021 (Proj.): -3.0 - 2021 (CR 21/8 Proj.): -6.9 - Primary fiscal balance (cash basis): - 2018: 2.8 - 2019: -6.1 - 2020: -1.1 - 2021 (Est.): -5.0 - Structural primary fiscal balance: - 2018: 1.5 - 2019: 1.2 - 2020: 0.5 - 2021 (Est.): -0.3 - 2021 (Proj.): -1.6 - Gross debt (percent of GDP): - 2018: 54.4 - 2019: 52.8 - 2020: 59.1 - 2021 (Est.): 58.4 - 2021 (Proj.): 57.7 - 2021 (CR 21/8 Proj.): 60.3 - (other series: 55.5, 58.9, 56.0) - Monetary sector (end of period 12-month change, percent): - 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 - 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 - Domestic credit to non-government (period average, percent): 10.1, 10.6, 12.0, 5.6, 6.6 - Balance of payments (percent of GDP): - Current account balance: - 2018: -4.8 - 2019: -5.7 - 2020: -4.3 - 2021 (Est.): -5.8 - 2021 (Proj.): -5.1 - 2021 (CR 21/8 Proj.): -5.6 - (other series: -4.9) - Exports of goods: - 2018: 35.2 - 2019: 35.7 - 2020: 32.6 - 2021 (Est.): 34.5 - 2021 (Proj.): 33.8 - 2021 (CR 21/8 Proj.): 39.3 - (other series: 36.8) - Imports of goods: - 2018: -47.1 - 2019: -47.9 - 2020: -43.5 - 2021 (Est.): -45.7 - 2021 (Proj.): -46.5 - 2021 (CR 21/8 Proj.): -50.4 - (other series: -49.4, -51.0, -51.3) - Trade of goods balance: - 2018: -11.9 - 2019: -12.2 - 2020: -10.9 - 2021 (Est.): -11.2 - 2021 (Proj.): -12.7 - 2021 (CR 21/8 Proj.): -12.6 - Capital and financial account balance: - 2018: 5.2 - 2019: 6.3 - External debt (percent of GDP): - 2018: 66.1 - 2019: 65.5 - 2020: 67.4 - 2021 (Est.): 70.9 - 2021 (Proj.): 64.3 - 2021 (CR 21/8 Proj.): 70.6 - (other series: 61.4, 68.0, 64.8) - Private external debt (percent of GDP): 30.9, 30.8, 29.9, 34.1, 28.8, 31.8, 27.3, 30.2, 28.5 - Gross official reserves (in billions of euro): - 2018: 11.3 - 2019: 13.4 - 2020: 13.5 - 2021 (Est.): 13.7 - 2021 (Proj.): 15.2 - 2021 (CR 21/8 Proj.): 14.3 - (other series: 16.1, 16.9) - Gross official reserves (in months of prospective imports): - 2018: 4.8 - 2019: 6.1 - 2020: 5.5 - 2021 (Est.): 5.4 - 2021 (Proj.): 4.7 - Gross official reserves (percent of short-term debt): - 2018: 195.3 - 2019: 408.9 - 2020: 204.0 - 2021 (Est.): 412.3 - 2021 (Proj.): 209.8 - 2021 (CR 21/8 Proj.): 463.6 - (other series: 217.9, 493.1, 516.3) - Gross official reserves (percent of broad money, M2): - 2018: 52.2 - 2019: 57.8 - 2020: 56.8 - 2021 (Est.): 54.6 - 2021 (Proj.): 53.2 - 2021 (CR 21/8 Proj.): 60.1 - (other series: 58.7) - Risk-weighted metric (percent of risk-weighted metric) 8/: - 2018: 111.2 - 2019: 126.2 - 2020: 122.0 - 2021 (Est.): 126.0 - 2021 (Proj.): 120.7 - 2021 (CR 21/8 Proj.): 129.0 - (other series: 119.2, 130.3, 129.6) - Exchange rate (dinar/euro, period average): - 2018: 118.3 - 2019: 117.9 - 2020: 117.6 - Social indicators: - Per capita GDP (in US$): 7,252; 7,392; 7,723; 7,646; 8,442; 8,878; 9,653; 9,629; 10,368 - Real GDP per capita (percent change): -0.4; 6.4; 4.9 - Population (in million): 7.0; 6.9 ### Selected statements - Tao Zhang, Deputy Managing Director and Acting Chair, emphasized: - Serbia has coped relatively well with the COVID-19 pandemic. - Sustaining a solid economic recovery should be a policy priority given uncertainty. - Scaling up public investment—including in green infrastructure—should support near-term growth. - Further structural and institutional reforms, green growth promotion, and enhancing social safety nets were stressed. *Press Release No. 21/189, June 18, 2021 — IMF Communications Department* --- ## References - [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) _Source: 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_