IMF backs Serbia's 0.5%/GDP budget deficit target for 2020

The deficit target would preserve fiscal discipline and keep public debt on a downward path, while the reintroduction of pension indexation in 2020 will ensure a more rules-based system, Jan Kees Martijn, head of an IMF mission that visited Belgrade said in a statement at the conclusion of the visit.

The mission reached staff-level agreement on policies needed to complete the third review under the Policy Coordination Instrument (PCI) with Serbia during the October 4-15 visit, the IMF said.

Serbia’s economic performance remains robust, with unemployment falling to record-low levels. The IMF projects real gross domestic product (GDP) growth at 3.5% in 2019 and 4% in 2020, supported by strong domestic demand. Inflation has remained low and is expected to be in the lower half of the inflation target range in 2020, he noted.

"The financial sector remains stable. Non-performing loans in the banking sector have fallen under 5%, the lowest level since 2008. The deposit insurance framework has been strengthened. Developing capital markets and continuing to promote dinarisation will be important to further enhance financial stability and support medium-term growth," Martijn added.

In July 2018, the IMF reached a staff-level agreement on a 30-month PCI with Serbia which includes reforms of the tax administration to help increase the efficiency of revenue collection and improve the business climate.