IMF国际货币组织全球-Republic-of-Serbia_Third-Review-under-the-Policy-Coordination-Instrument_64页_1mb

Summary of IMF Country Report No. 19/369: Republic of Serbia

Core Content

This document outlines the third review under the Policy Coordination Instrument (PCI) for the Republic of Serbia, conducted by the IMF Executive Board on December 19, 2019, without a formal meeting. The review assesses Serbia's economic performance, program implementation, and future outlook, highlighting progress and areas requiring further attention.

Main Points

Economic Performance

• Serbia's economy continues to perform strongly, supported by domestic demand, exports, and record FDI inflows.
• Real GDP growth is projected at 3.5% in 2019 and 4% in 2020, with a small negative output gap in 2019.
• Inflation remains close to the lower limit of the NBS inflation band, and three rate cuts have been implemented since July 2019.
• Unemployment has reached record-low levels, with average net wages rising by 8.7% in August 2019.
• Income inequality has declined, with the Gini coefficient dropping from 40.0% to 35.6% between 2015 and 2018.

Program Implementation

• The economic program is on track, with quantitative targets (QTs) for end-September 2019 met.
• Most reform targets (RTs) have been implemented, though with delays in some areas.
• The 2020 budget targets a deficit of 0.5% of GDP, maintaining a declining public debt path while creating fiscal space for capital investments and lower labor taxation.

Fiscal Policy

• Fiscal performance remains sound, with a surplus of 0.6% of GDP in the first nine months of 2019.
• Revenue growth was boosted by higher social security contributions and non-tax revenues.
• Public debt continues to decline, and investor confidence supports a shift to less expensive financing sources.
• The 2020 budget includes reforms to labor taxation, such as a 0.5 percentage point reduction in employer contributions to pension and disability insurance, and an increase in non-taxable income.

Monetary and Financial Sector Policies

• The monetary stance remains accommodative, with interest rates declining and credit activity robust.
• The NBS has been a net purchaser of foreign exchange, limiting dinar appreciation against the euro.
• Capital market development and dinarization are important for enhancing financial stability and supporting medium-term growth.
• Privatization of Komercijalna is recommended to proceed as planned.

Structural Reforms

• Structural reforms are advancing, but delays persist in some areas.
• Key reforms include public wage system reform, public employment framework updates, and SOE management improvements.
• A thorough assessment of electricity tariffs is recommended to ensure full cost recovery.
• New fiscal rules for 2021 are expected to help preserve fiscal sustainability.

Key Information

• IMF PCI is the second such arrangement in the IMF's history, approved in July 2018.
• FDI inflows have reached record levels, contributing to dinar appreciation pressures.
• Exchange rate (dinar/euro) has appreciated by 0.8% during January-October 2019.
• General government debt is expected to decline to 47.8% of GDP by 2021.
• Fiscal balance is projected to remain negative at -0.5% of GDP in 2020 and 2021.
• Wage bill is projected to increase to 9.5% of GDP in 2020, which could reduce fiscal space for growth.

Outlook and Risks

• The economic outlook is positive, with continued reform momentum.
• Inflation is expected to gradually rise to the midpoint of the target band by 2024.
• The current account deficit is projected to widen to 5.9% of GDP in 2019, then decline to 4.1% by 2024.
• Reserves are expected to reach 12.5 billion euros by the end of 2019, equivalent to 4.9 months of prospective imports.
• Risks are moderate, mainly from external factors such as regional spillovers and protectionist policies.
• Domestic risks include delays in structural reforms, capacity constraints, and potential loss of fiscal discipline.

Program Policy Discussions

A. Fiscal Policy

• Staff advised the authorities to carefully manage spending plans to avoid exceeding the budget and program deficit ceilings.
• Labor taxation reforms are expected to lower the labor tax wedge and increase non-taxable income.
• Presumptive taxation is being reformed to enhance equity and transparency, with targeted exemptions introduced for professionals exiting the regime.
• Pension indexation will be linked to 50% inflation and 50% wage growth, reducing pension spending as a percent of GDP.

B. Monetary Policy

• The monetary stance remains appropriate, with low inflationary pressures.
• Developing capital markets and promoting dinarization are key to financial stability.

C. Financial Sector Policies

• The financial sector remains stable, but reforms are needed to enhance resilience.
• The privatization of Komercijalna is recommended to proceed as planned.

D. Structural Reforms

• Public sector wage system and employment framework reforms are ongoing, with implementation delays.
• SOE management and corporate governance improvements are necessary for private investment climate.
• A comprehensive list of SOEs has been published, and a tender for DIA asset valuation has been launched.

Conclusion

The IMF has completed the third review of Serbia's PCI program, noting positive economic developments and robust program implementation. However, delays in structural reforms and fiscal discipline remain concerns. The 2020 budget is expected to support fiscal sustainability and growth through reforms and fiscal space. The economic outlook remains positive, but external and domestic risks could affect progress. The IMF recommends continued reform efforts, fiscal discipline, and financial sector development to support long-term stability and growth.