## IMF Staff Concludes Visit to Serbia

_IMF News, October 22, 2021_

## Source details

**Canonical URL:** [IMF Staff Concludes Visit to Serbia](https://www.imf.org/en/news/articles/2021/10/22/pr21308-serbia-imf-staff-concludes-visit-to-serbia)

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## Bibliographic details
- Published: October 22, 2021

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### Mission overview
- IMF mission led by Jan Kees Martijn held virtual and in-person meetings with Serbian authorities during October 11 – 22, 2021 to discuss progress under the Policy Coordination Instrument (PCI).
- Statement issued at conclusion of the mission; views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
- Successful completion of the first review is subject to meeting remaining program conditions and approval by IMF Management and the Executive Board; Board consideration is tentatively scheduled for December 2021.

### Economic outlook and growth projections
- “GDP growth is projected at 6.5 percent in 2021 and at 4.5 percent in 2022.”
- “The current-account deficit is projected to narrow to about 4 percent of GDP this year and remain fully financed by net FDI inflows.”
- Banking system described as “stable, liquid and well capitalized.”
- Exchange rate has “remained stable.”

### Inflation and monetary policy
- “Headline inflation increased to 5.7 percent in September, driven by a low-base effect and temporary factors including rising energy prices and higher unprocessed food prices due to drought.”
- “Core inflation has remained relatively stable.”
- Expectation: inflation “is expected to stay above the upper bound of the NBS target band in the remainder of 2021 and return within the target band in 2022.”
- Monetary response: National Bank of Serbia (NBS) “appropriately tightened monetary conditions in early October by raising the average repo rates within the interest rate corridor while keeping the policy rate unchanged.”
- Recommendation: “The NBS should continue close monitoring of the inflation outlook and stand ready to respond as needed.”

### Fiscal performance, 2021 outcomes, and 2022 budget guidance
- Fiscal performance in 2021 described as “strong … boosted by an exceptional increase in tax revenues amid strong economic activity.”
- 2021 government deficit projection: “decline to 4.9 percent of GDP, 2 percentage points of GDP lower than initially expected.”
- Under the new supplementary budget, part of revenue overperformance will finance additional investment spending.
- 2022 fiscal stance guidance:
  - “It would be appropriate to narrow the 2022 fiscal deficit to 3 percent of GDP, putting public debt on a clear downward path.”
  - Public sector wage increases should be limited.
  - Structural pension increases should be guided by the existing indexation formula.
  - Budget should ensure adequate room for healthcare and maintain capital expenditures above historical levels to address infrastructure needs and support a green recovery.
  - Approval of a budget with a deficit and primary spending level along these lines will be a prior action for the first review under the PCI.

### Energy prices, risks, and policy recommendations
- Risk: “Rising international energy prices present risks to inflation and economic growth.”
- Existing policy: “The current system of partially regulated energy prices in Serbia helps address the immediate negative impact on households.”
- Recommendations if energy price spikes persist:
  - Measures to cushion adverse long-term effects on businesses should be “limited in time and scale, transparent, and non-discriminatory, based on objective criteria.”
  - Avoid additional fiscal risks from SOEs.
  - Continue efforts to promote energy efficiency.
  - “If higher international energy prices were to persist, the increases should be passed on throughout the economy while protecting vulnerable households.”

### Structural reforms and outstanding priorities
- Progress noted in:
  - Privatizing Petrohemija.
  - Improving fiscal reporting.
  - Strengthening fiscal risks management.
  - Enhancing state aid control.
- Policy priorities and reforms remaining to be implemented:
  - Implement the new capital market development strategy to support domestic investment.
  - Introduce a new payroll information system.
  - Anchor medium-term fiscal discipline with a new set of fiscal rules.
  - Continue implementing the new SOE ownership strategy.
  - Ensure a green recovery.

### Closing
- “The mission is grateful for the authorities’ close cooperation.”

*IMF Press Release No. 21/308, October 22, 2021.*

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## Content in this bundle

- **IMFa završio posetu Srbiji**
  - [IMFa završio posetu Srbiji (Markdown version)](/-/media/files/news/press-release/2021/pr21308-srb-serbia-imf-staff-concludes-visit-to-serbia.pdf.md){rel="alternate" type="text/markdown"}
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## References

- [Republic of Serbia and the IMF](http://www.imf.org/external/country/SRB/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2021/10/22/pr21308-serbia-imf-staff-concludes-visit-to-serbia_