IMF doesn't approve increasing salaries and pensions – Growth of Serbia's GDP of 2.5% and inflation of 1.3% expected

Serbia's economic program continues to produce good results and Serbian authorities are still making progress in fiscal consolidation, but there still are challenges which need to be overcome in order to permanently improve the fiscal situation and for Serbia to record a bigger mid-term growth, assessed the Mission of the International Monetary Fund (IMF).

The Mission of the IMF, which visited Belgrade from June 9 to June 21 to discuss the fourth and fifth reviews of the precautionary Stand-By Arrangement between Serbia and the IMF, assessed that Serbia's economic growth was increasing with the support of investments and the growth of the net exports.

It is expected that in 2016 the real growth of gross domestic product (GDP) will be 2.5% and that the inflation will be 1.3%, states the report by the Fund. It has been assessed that the good fiscal results from 2015 are continuing and that all the goals within the program for March were realized, the majority of them with results far exceeding the projected ones.

The IMF says that, if Serbia continues to improve income collection and rational expenditure performance, the deficit at the general level of the state should go down to about 2.5% of GDP compared to the initial goal of 4%.

When it comes to challenges, further effort is needed for Serbia's large public debt to start recording a stable and sustainable fall along with making room for the necessary public investments and the securing of reserves for potential risks.

A more decisive reform of state-owned enterprises is needed, including large public and mining enterprises, the report states and points out that for many years the failure to restructure the inefficient and unsustainable state-owned enterprises was a big obstacle to growth.

The Fund points out that the only sustainable way of protecting the jobs in state-owned enterprises, without reaching for taxpayers' money to save them, is to restructure the enterprises in order to secure their sustainability on commercial grounds.

The IMF reported that the Mission had reached the agreement with Serbian authorities on the policies needed to finalize the fourth and the fifth reviews of the Arrangement. The analysis of the agreement by the Executive Board of the IMF is scheduled for the end of August.

Salaries and pensions in Serbia cannot increase

(Photo: Family Business/shutterstock.com)

Salaries and pensions in 20016 in Serbia should remain at the current level, stated the IMF Mission Chief James Roef. He added that it was important to first achieve a bigger economic growth which would enable bigger income and to not rush to approve big raises.

The Minister of Finance Dusan Vujovic said that it was needed for each raise to be harmonized with the new criteria and to gradually eliminate the existing discrepancies. Roef said that during the Mission's visit there had been a lot of talk about the electric energy sector and the need to restructure Elektroprivreda Srbije.

When asked about electricity prices, he said that the issue should be solved in the talks between the Government of Serbia and the World Bank, since that was the area of expertise of that institution. - People should get used to regulated prices year by year, which is the world's practice – said Roef.

The resident representative of the IMF Daehaeng Kim said that the electricity price was just one of the elements of EPS's activities and that more attention should be paid to the operations of that public enterprise. - When EPS wants to increase the investments without saving money on labor, it means that someone else has to pay for it – said Daehaeng Kim.