Republic of Serbia : Fifth Review under the Policy Coordination Instrument-Press Release; and Staff Report

	IMF Country Report No. 21/8
	REPUBLIC OF SERBIA
	FIFTH REVIEW UNDER THE POLICY COORDINATION
January 2021	INSTRUMENT-PRESS RELEASE; AND STAFF REPORT
	In the context of the Fifth Review under the Policy Coordination Instrument, the following
	documents have been released and are included in this package:
	• A Press Release
	• The Staff Report prepared by a staff team of the IMF for the Executive Board's
	consideration on a lapse of time basis, following discussions that ended on October
	16, 2020, with the officials of Republic of Serbia on economic developments and
	policies underpinning the IMF arrangement under the Policy Coordination Instrument.
	Based on information available at the time of these discussions, the staff report was
	completed on December 11, 2020.
	The IMF's transparency policy allows for the deletion of market-sensitive information and
	premature disclosure of the authorities' policy intentions in published staff reports and
	other documents.
	Copies of this report are available to the public from
	International Monetary Fund • Publication Services
	PO Box 92780 • Washington, D.C. 20090
	Telephone: [phone]• Fax: [phone]
	E-mail: [e-mail]:http://www.imf.org
	Price: $18.00 per printed copy
	International Monetary Fund
	Washington, D.C.

© 2021 International Monetary Fund

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PR21/3

IMF Executive Board Completes the Final Review Under the Policy Coordination Instrument for the Republic of Serbia

FOR IMMEDIATE RELEASE

• Program implementation has remained on track throughout the PCI that will expire in January 2021.
• Due to the COVID-19 pandemic, Serbia's real GDP is projected to contract by 1.5 percent in 2020, and recover in 2021 with growth at 5 percent.
• The 2021 budget appropriately balances support for economic recovery with fiscal responsibility.

WASHINGTON, DC - January 8, 2021: The Executive Board of the International Monetary Fund (IMF) concluded the Fifth Review Under the Policy Coordination Instrument (PCI) for the Republic of Serbia.1 The Executive Board's decision was taken without a meeting.2

This was the final review under the PCI that was approved on July 18, 2018 (see Press Release No. 18/299). Program implementation has remained on track throughout the PCI. The policy program has facilitated macroeconomic and financial stability, while advancing an ambitious reform agenda to foster rapid growth, job creation, and improved living standards. In response to the COVID-19 pandemic, program priorities shifted to supporting the economy and people through the crisis.

Due to the pandemic, Serbia's real GDP growth is projected to contract by 1.5 percent in 2020 before rebounding to 5 percent in 2021. Economic activity picked up in the third quarter of 2020 following the sharp contraction during the previous quarter. Policy measures-including monetary policy support and a large fiscal package worth about 9 percent of GDP-have played an important role in supporting the economy. The recent acceleration in infection rates in Serbia and its major trading partners could negatively impact the nascent recovery and a stronger-than-expected infection wave presents a clear downside risk to the outlook. The quantitative targets for end-September 2020 were met and sufficient progress was made in meeting the structural reform targets. Inflation remains close to the lower limit of the National Bank of Serbia's inflation band.

The fiscal deficit in 2021 is planned at 3 percent of GDP, and would help ensure that public debt in percent of GDP resumes a declining path, while also creating enough space to support the recovery, including through higher public investments. Within this envelope, increases in public sector wages should be limited and pension increases are expected to follow the agreed Swiss formula. The unwinding of support measures could be made more gradual if further shocks materialize.

• 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

• 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

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Going forward, it will be important for Serbia to build on its achievements under the current program by continuing to pursue structural and institutional reforms that will deliver faster convergence of incomes with EU countries. Medium-term priorities include capital market development and improving governance, including strengthening the rule of law.

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