Press Release No. 15/208

Press Release: Statement by an IMF mission to Serbia

May 11, 2015

An International Monetary Fund (IMF) mission, led by Ms. Zuzana Murgasova, visited Belgrade during April 29-May 11, 2015, to hold discussions on the first review of Serbia’s precautionary Stand-By Arrangement (SBA) with the IMF. At the conclusion of the visit, Ms. Murgasova issued the following statement:

“The mission reached staff-level agreement with the authorities, subject to approval by IMF Management and the Executive Board, on the set of policies needed to complete the first review under the precautionary SBA. Consideration by the Executive Board is tentatively scheduled for late June. The completion of the review will make available additional SDR 117 million (about €146 million), although the Serbian authorities have indicated that they do not intend to draw on the resources available under the arrangement.

“The economic outlook is somewhat improved, and the IMF mission increased the real GDP growth projection for 2015 from –0.5 percent to 0 percent. This reflects the effects of lower oil prices on domestic demand as well as stronger external demand. However, the economy still remains well below its potential, and this, together with low import prices and delays in administered price increases, has been contributing to low inflation. The authorities’ steadfast implementation of sound economic policies and structural reforms is essential to foster robust growth in the coming years.

“Fiscal performance in the first quarter of 2015 was fully in line with the program targets. The general government deficit was considerably lower than projected largely due to higher revenues. While one-off factors played an important role, stronger VAT and excise revenues are worth noting. The current primary expenditure of the Republican budget was below the target, and most of the fiscal consolidation measures underlying the 2015 budget have been implemented as planned.

“Monetary and financial sector policies have remained on track. The ongoing fiscal consolidation has created space for monetary easing as envisaged in the program. This should be supportive of the economic recovery. The mission welcomes the authorities’ ongoing efforts to implement reforms aimed at preserving the stability and resilience of the financial sector. This includes the progress in special diagnostic studies for large banks and a comprehensive strategy to address the overhang of non-performing loans and improve financial intermediation.

“The mission welcomed the authorities’ determination to address delays in some structural reforms and commitment to press ahead with a broad-based structural reform agenda. It also urged its timely implementation, particularly in the areas of state-owned enterprise restructuring as well as improving the business climate,” Ms. Murgasova said.