The Executive Board of the International Monetary Fund (IMF) successfully completed the eighth review of Serbia’s current stand-by precautionary arrangement at the session held on December 20, 2017.
As said in a press release by the National Bank of Serbia (NBS), during the arrangement that will expire on February 22, 2018, the Republic of Serbia did not use the available funds.
In its meeting the Executive Board assessed that Serbia has made significant progress under the agreed economic program. Market confidence has improved, investment and growth are stronger. The IMF applauded the improvement of labor market conditions, inflation moving close to the target midpoint, accelerated public debt decrease and strong external position of the country. Significant progress has also been recorded in the structural reform agenda, but it was also pointed out that deeper institutional reforms in this area are required to secure sustainable economic growth.
As regards fiscal policy, it has been emphasized that significant fiscal adjustment has placed public debt on a downward trajectory and that the 2018 Law on Budget provided space for capital investment and for some further employment-friendly tax reductions. Continuation of reforms will improve public administration and contribute to the more efficient delivery of public services.
The IMF assessed that monetary policy has succeeded in keeping inflation under firm control and is supporting the economic recovery. Qualifying the approach to monetary policy as appropriate in light of domestic and external uncertainties, the IMF welcomed the exchange rate flexibility demonstrated recently, with appreciation reflecting Serbia’s improved macroeconomic fundamentals and market conditions, the press release by the NBS adds.
Financial sector reforms have strengthened the banking sector, and put it in a much better position to support the economy. The IMF commended very good results of NPL Strategy implementation, stressing the need to continue these efforts.
The significant progress with structural reforms has strengthened Serbia’s growth potential, reduced fiscal risks and brought about job creation. The IMF suggests that substantial work remains to be done in regard to the remaining state-owned enterprises in order to improve their governance and management, investment and administrative capacity. It has been noted that Serbia’s business environment has improved in conditions of both macroeconomic stability and a better regulatory environment. Tax reform continuation is suggested as well as addressing the uncertainty in the judicial system in order to further spur business activity.
The IMF Executive Board concluded that the approaching completion of the program will mark a successful macroeconomic adjustment and a significant strengthening of Serbia’s economic capacity as a result of the agreed economic agenda implementation, the NBS press release adds.
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