IMF Executive Board Concludes the Third Review Under the Policy Coordination Instrument for the Republic of Serbia
IMF News, June 15, 2026
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- Published: June 15, 2026
Review outcome and publication
- The Executive Board concluded the Third Review Under the Policy Coordination Instrument (PCI) for the Republic of Serbia on a lapse-of-time basis.
- The authorities consented to the publication of the Staff Report prepared for the review.
- Staff support the authorities’ request for completion of the third review under the PCI.
Economic outlook and risks
- Growth and inflation:
- Following growth of 2 percent in 2025, economic activity strengthened in early 2026.
- Growth is projected at about 2.8 percent in 2026 and to accelerate to 4.0 percent in 2027.
- Headline inflation remained moderate at 3.3 percent year-on-year in April, within the National Bank of Serbia (NBS)'s tolerance band of 3 percent ±1.5 percentage points.
- Outlook risks:
- Risks to the outlook are tilted to the downside amid intensifying external and domestic headwinds and heightened uncertainty.
- The war in the Middle East is cited as weighing on global markets and could worsen downside risks if prolonged.
- External position and buffers:
- Gross international reserves remain well within the adequacy range despite increased external pressures.
- Serbia’s strengths include a broadly aligned external position, moderate public debt, high international reserves, and a well-capitalized banking system.
Fiscal policy, public finances, and fiscal risks
- Fiscal framework and commitments:
- The 2026 budget maintains the program fiscal deficit ceiling of 3 percent of GDP and remains consistent with the fiscal rules on wages and pensions.
- Authorities committed to keeping measures introduced in response to the energy price shock temporary, strengthening fiscal risk management, and advancing fiscal structural reforms in public financial management and public investment management.
- Fiscal risks and contingency planning:
- Fiscal risks are elevated from the energy shock and pressures related to Roads of Serbia (RoS) and the City of Belgrade.
- Should the energy shock persist, preserving the fiscal anchor will require implementing contingency measures identified by the authorities, including current spending rationalization and strict prioritization of investment projects.
- Guidance on energy-related measures:
- Measures to cushion the energy price shock should be temporary and targeted.
- The recent fuel excise cuts should be phased out by July 2026 under the baseline scenario, in which oil prices remain broadly at current levels.
- Costs of temporary measures should be accommodated within the fiscal deficit ceiling through reprioritization of current and capital spending.
- If energy market pressures persist, additional support should be well-targeted to vulnerable households while preserving price signals and safeguarding fiscal space for investment priorities.
- Public entities and arrears:
- Domestic arrears at RoS should be durably addressed through stronger monitoring and expenditure controls, and measures to align operational obligations with revenues.
- The ongoing assessment of the financial position of the City of Belgrade should be completed promptly to mitigate fiscal risks ahead of the next budget cycle.
- Fiscal-structural reform priorities:
- Continue reforms to strengthen PIM, fiscal transparency, and revenue administration.
- Improve appraisal, prioritization, and monitoring of all large public investment projects, including those outside regular PIM processes.
- Planned publication of additional data on local governments, mineral taxation, and PPPs to strengthen transparency and accountability.
- Strengthen tax administration capacity and compliance, including through more targeted audits.
Monetary policy and financial sector
- Monetary stance and inflation control:
- Monetary policy has maintained a tightening bias; monetary policy should remain tight and be tightened further if inflation expectations rise, second-round effects emerge, or inflation settles above the upper bound of the tolerance band.
- Banking sector and macroprudential stance:
- The banking sector remains sound, supported by strong capitalization, liquidity, and profitability.
- Staff welcome the activation of the CCyB and the authorities’ commitment to allow temporary supervisory expectations on lending rates to expire.
- Authorities should be ready to deploy additional macroprudential measures should systemic risks build.
- Continued close monitoring of credit developments is warranted to contain inflation and financial stability risks.
- Housing measures:
- In light of continued double-digit household credit growth and further expansion of the mortgage guarantee scheme for first-time young homebuyers, the mortgage guarantee scheme should not be further expanded.
- Any future modifications to the mortgage guarantee scheme should be subject to prior consultation with staff.
Energy sector and restructuring needs
- Energy sector priorities:
- Sustained energy sector reform is increasingly important given heightened energy security risks and elevated energy prices.
- Strengthening the financial position of energy SOEs is essential to create space for needed investment, support energy security, and contain fiscal risks.
- Restructuring efforts at EPS should accelerate to achieve timely workforce rationalization and stronger governance ahead of planned large-scale investments.
- Continued progress toward cost-recovery electricity tariffs and stronger payment discipline among major debtors remains important for sector financial sustainability.
- Persistent non-payment of energy bills—particularly by SOEs and sub-national entities—should be decisively addressed.
- Targeted energy support for vulnerable households should continue.
Structural and governance reforms
- Broader structural reform agenda:
- Reinvigorating structural reforms is critical to support Serbia’s transition toward a higher value-added growth model.
- Governance reforms should focus on reducing integrity risks in business regulation, licensing, inspections, and public service delivery.
- Staff welcome the authorities’ plan to amend the Law on Prevention of Corruption to extend asset declaration requirements to SOE top managers and board members.
- Improving efficiency of judicial dispute resolution is important for the investment climate; judiciary digitalization should be complemented by an assessment of bottlenecks in resolving business-related civil and administrative cases.
- Authorities should preserve labor market flexibility as labor laws are aligned with EU requirements.
- Trade facilitation reforms would further support Serbia’s EU integration.
Program performance
- Program implementation and targets:
- Program performance remained strong.
- All end-2025 quantitative targets on the fiscal deficit, primary current expenditure, domestic arrears, and net international reserves, as well as continuous targets, were met.
- Implementation of fiscal structural reforms progressed well, and all reform targets were completed on schedule.
Selected Economic Indicators, 2025–28
- Output — Real GDP growth (%):
- 2025 Est.: 2.0
- 2nd PCI review: 3.0
- 2026 Proj.: 2.8
- 2027 Proj.: 4.6
- 2028 Proj.: 4.0
- (Additional projection entries in table): 3.8, 3.5
- Employment — Unemployment rate (labor force survey) (%):
- 2025 Est.: 8.7
- 2nd PCI review: 8.8
- 2026 Proj.: 8.6
- Prices — Inflation (%), end of period:
- 2025 Est.: 5.0
- 2nd PCI review: 3.2
- 2026 Proj.: 3.9
- General Government Finances:
- Revenue (% GDP):
- 2025 Est.: 41.0
- 2nd PCI review: 40.8
- 2026 Proj.: 40.3
- 2027 Proj.: 40.9
- 2028 Proj.: 40.0
- Expenditure (% GDP):
- 2025 Est.: 43.4
- 2nd PCI review: 43.8
- 2026 Proj.: 43.3
- 2027 Proj.: 43.9
- 2028 Proj.: 42.5
- Fiscal balance (% GDP):
- 2025 Est.: -2.4
- 2nd PCI review: -3.0
- 2026 Proj.: -2.5
- Public debt (% GDP):
- 2025 Est.: 44.8
- 2nd PCI review: 44.7
- 2026 Proj.: 44.4
- 2027 Proj.: 44.6
- 2028 Proj.: 44.0
- (Additional projection entries in table): 44.3
- Money and Credit:
- Broad money, eop (% change):
- 2025 Est.: 6.5
- 2nd PCI review: 7.8
- 2026 Proj.: 7.7
- 2027 Proj.: 9.2
- 2028 Proj.: 9.5
- (Additional projection entries in table): 7.5, 9.0
- Credit to the private sector, eop (% change) 1/:
- 2025 Est.: 14.3
- 2nd PCI review: 13.8
- 2026 Proj.: 12.0
- 2027 Proj.: 13.7
- 2028 Proj.: 14.0
- (Additional projection entries in table): 8.9
- Note: Calculated at a constant exchange rate to exclude the valuation effects.
- Balance of Payments:
- Current account (% GDP):
- 2025 Est.: -4.9
- 2nd PCI review: -6.0
- 2026 Proj.: -4.5
- 2027 Proj.: -5.3
- FDI (% GDP):
- 2025 Est.: 2.6
- 2nd PCI review: 4.2
- 2026 Proj.: 4.1
- Reserves (months of prospective imports):
- 2025 Est.: 6.7
- 2nd PCI review: 6.0
- 2026 Proj.: 5.9
- 2027 Proj.: 5.8
- 2028 Proj.: 5.7
- External debt (% GDP):
- 2025 Est.: 58.7
- 2nd PCI review: 55.9
- 2026 Proj.: 57.5
- 2027 Proj.: 51.9
- 2028 Proj.: 54.9
- (Additional projection entries in table): 48.9, 52.8
- Exchange Rate — REER (% change):
- 2025 Est.: 1.6
- 2nd PCI review: …
Source: IMF press release, June 15, 2026.