IMF Executive Board Completes First Review Under Policy Coordination for Republic of Serbia

December 21, 2021

  • Program implementation is on track and the structural reform momentum has been broadly maintained.
  • With a robust economic recovery underway, Serbia’s real GDP is projected to grow 6.5 percent in 2021 and 4.5 percent in 2022.
  • The 2022 budget appropriately supports the economic recovery through high investment while also marking a gradual return to fiscal restraint.

WASHINGTON, DC : The Executive Board of the International Monetary Fund (IMF) concluded the First Review Under the Policy Coordination Instrument (PCI) for the Republic of Serbia. [1] The Executive Board’s decision was taken without a meeting. [2]

The PCI was approved on June 18, 2021 (see Press Release No. 21/189 ) and aims at supporting the recovery from the pandemic, maintaining macroeconomic stability, and

anchoring the medium-term fiscal policy framework, while pushing ahead with structural

reforms to deliver more inclusive and sustainable growth.

A strong economic recovery is underway, with Serbia’s real GDP growth projected to rebound to 6.5 percent in 2021 and reach 4.5 percent in 2022. GDP exceeded its pre-crisis level by the first quarter of 2021, and economic activity remained robust through the third quarter, supported by household consumption and investment. Swift policy actions—along with low reliance on tourism and other high-contact sectors, and strong growth momentum going into the crisis—have helped limit the pandemic’s negative effects on Serbia’s economy. However, Serbia remains vulnerable to spillovers from external developments, including a weaker-than-expected recovery in key European trading partners, supply chain disruptions, and rising energy prices globally. The quantitative and reform targets for end-June 2021 were met, as were the reform targets for end-September 2021, though with minor delays. The banking system has remained stable, liquid, and well capitalized.

Headline inflation has been above the 4.5 percent upper limit of the National Bank of Serbia’s target band since September, but is expected to revert to the lower half of the inflation tolerance band in the second half of 2022 as the effects from this year’s drought wane and energy prices stabilize. In light of the rise in inflation and its uncertain outlook, the monetary authorities tightened monetary conditions in early October.

The 2022 budget envisages a reduction in the fiscal deficit to 3 percent of GDP, which will help ensure that public debt in percent of GDP resumes a clear downward path, while also continuing to support the recovery through high public investments.


[1] The PCI is available to all IMF members that do not need Fund financial resources at the time of approval. It is designed for countries seeking to demonstrate commitment to a reform agenda or to unlock and coordinate financing from other official creditors or private investors

[2] The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions

Table 1. Serbia: Selected Economic and Social Indicators, 2018-2024

2018

2019

2020

2021

2022

2023

2024

Prel.

CR 21/132

Proj.

CR 21/132

Proj.

CR 21/132

Proj.

Proj.

(Percent change, unless otherwise indicated)

Real sector

Real GDP

4.5

4.3

-0.9

6.0

6.5

4.5

4.5

4.5

4.5

4.0

Real domestic demand (absorption)

6.5

6.3

-0.9

5.8

5.1

4.5

4.9

4.5

5.1

4.3

Consumer prices (average)

2.0

1.9

1.6

2.5

4.0

2.6

4.9

2.6

3.5

3.0

GDP deflator

2.0

1.9

1.3

3.0

7.0

2.4

2.5

2.6

3.0

3.0

Unemployment rate (in percent) 1/

2.0

2.4

2.4

2.6

4.9

2.9

4.7

2.9

3.8

3.2

Nominal GDP (in billions of dinars)

14.1

11.6

10.0

…

…

…

…

…

…

…

5,073

5,422

5,502

5,942

6,147

6,389

6,725

6,868

7,295

7,831

(Percent of GDP)

General government finances

Revenue 2/

41.5

42.0

41.0

41.7

43.6

41.4

41.7

41.6

41.7

41.8

Expenditure 2/

40.9

42.2

49.0

48.7

48.5

44.4

44.7

43.1

43.2

42.9

Current 2/

36.4

36.9

42.8

40.9

40.3

37.2

37.0

36.5

36.2

35.9

Capital and net lending

4.1

5.1

6.1

7.6

8.1

6.8

7.4

6.5

6.8

6.8

Amortization of called guarantees

0.4

0.2

0.1

0.2

0.1

0.3

0.2

0.1

0.1

0.2

Fiscal balance 3/

0.6

-0.2

-8.0

-6.9

-5.0

-3.0

-3.0

-1.5

-1.5

-1.1

Primary fiscal balance (cash basis)

2.8

1.8

-6.0

-5.0

-3.1

-1.1

-1.2

0.4

0.3

0.7

Structural primary fiscal balance 4/

2.8

1.5

-4.0

-0.3

-3.4

-1.6

-1.7

0.3

0.2

0.6

Gross debt /5

54.4

52.8

57.9

60.3

58.3

58.9

56.5

56.0

53.9

51.4

(End of period 12-month change, percent)

Monetary sector

Money (M1)

20.1

16.3

36.3

11.8

11.4

8.4

9.0

8.0

8.6

7.9

Broad money (M2)

15.0

8.8

18.4

9.1

10.6

7.8

8.4

7.5

8.1

7.4

Domestic credit to non-government 6/

10.1

9.5

12.0

5.6

5.8

4.6

5.1

6.6

4.3

4.5

(Period average, percent)

Interest rates (dinar)

NBS key policy rate

3.1

2.3

1.0

…

…

…

…

…

…

…

Interest rate on new FX and FX-indexed loans

2.8

3.1

3.0

…

…

…

…

…

…

…

(Percent of GDP, unless otherwise indicated)

Balance of payments

Current account balance

-4.8

-6.9

-4.2

-5.1

-4.1

-5.0

-4.3

-4.9

-4.3

-4.8

Exports of goods

35.2

35.7

34.3

39.3

39.1

40.3

39.2

40.8

39.0

39.4

Imports of goods

-47.1

-47.9

-45.4

-50.4

-49.5

-51.0

-49.5

-51.3

-49.3

-49.6

Trade of goods balance

-11.9

-12.2

-11.2

-11.2

-10.4

-10.7

-10.3

-10.5

-10.3

-10.2

Capital and financial account balance

6.7

10.6

5.2

8.4

11.1

6.8

5.9

6.3

6.7

7.1

External debt (percent of GDP) 7/

66.1

65.4

70.4

70.6

68.4

68.0

64.8

64.8

62.1

59.4

of which: Private external debt

30.9

30.8

33.9

31.8

31.1

30.2

29.0

28.5

27.2

25.8

Gross official reserves (in billions of euro)

11.3

13.4

13.5

15.2

17.1

16.1

18.0

16.9

19.5

21.0

(in months of prospective imports)

4.8

6.1

5.2

5.4

6.0

5.4

5.9

5.2

5.9

5.9

(percent of short-term debt)

195.3

408.9

412.3

463.6

523.2

493.1

551.4

516.3

594.8

640.5

(percent of broad money, M2)

52.2

57.7

57.3

60.3

65.7

60.1

63.6

58.7

63.9

64.5

(percent of risk-weighted metric) 8/

111.2

126.1

126.0

129.0

139.3

130.3

138.7

129.6

142.4

146.3

Exchange rate (dinar/euro, period average)

118.3

117.9

117.6

…

…

…

…

…

…

…

REER (annual average change, in percent;

+ indicates appreciation)

2.8

1.0

1.5

…

…

…

…

…

…

…

Social indicators

Per capita GDP (in US$)

7,252

7,397

7,700

8,878

9,012

9,629

9,940

10,368

10,904

11,810

Real GDP per capita (percent change)

5.1

4.6

-0.4

6.4

6.9

4.9

4.9

4.9

4.9

4.4

Population (in million)

7.0

7.0

6.9

6.9

6.9

6.9

6.9

6.8

6.8

6.8

Sources: Serbian authorities; and IMF staff estimates and projections.

1/ Unemployment rate for working age population (15-64).

2/ Includes employer contributions.

3/ Includes amortization of called guarantees.

4/ Primary fiscal balance adjusted for the automatic effects of the output gap both on revenue and spending as well as one-offs.

5/ Excludes state guarantees on bank loans under the credit guarantee scheme introduced in response to the COVID-19 crisis, estimated

at 1.1 percent of GDP as of August 15th, 2021.

6/ At constant exchange rates.

7/ After CR19/369, domestic securities held by non-residents are included in external debt. Historical data were updated since 2015.

8/ The risk-weighted metric is IMF's ARA metric for the fixed exchange rate. Serbia was reclassified as stabilized exchange rate regime in 2019.

IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Raphael Anspach

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