December 21 (SeeNews) - The International Monetary Fund (IMF) expects Serbia's consumer price index (CPI) to return to the lower part of the 1.5%-4.5% target band in the second half of 2022, the central bank said.
With the gradual normalisation of demand and supply, inflation will return to the lower half of the target band in the second half of next year, when the effects of the drought from 2021 will wane and energy prices will stabilise, the IMF said after its executive board completed the first review of the economic programme defined by the Policy Coordination Instrument (PCI) for Serbia, the central bank said in a statement on Monday.
Serbia's consumer prices rose by 7.5% year-on-year in November, after growing by 6.6% in October, official statistics showed on Monday. On a monthly comparison basis, Serbia's consumer price index (CPI) went up 0.9% in November, after rising by the same rate in October.
IMF considers that vigorous economic recovery is underway in Serbia, supported by a large-scale, timely policy response and strong pre-crisis growth momentum, while the banking sector is liquid and the financial system is healthy, the central bank said.
"The medium-term macroeconomic framework that the IMF projects for Serbia is pretty good and realistic. The framework projects medium-term growth of 4%-4.5% and sustainable public finances, along with the improvement of all fiscal parameters. It also envisages the preservation of the country’s external position, which is within sustainable bounds," central bank governor Jorgovanka Tabakovic said in the statement.
According to the IMF, the risks going forward originate from weaker than expected recovery of Serbia’s main European trade partners, disruptions to supply chains, and rising global energy prices.
The IMF board made the decision without an official meeting, which is a possibility used when assessed that a formal discussion is not needed, the central bank explained.
In the October edition of its World Economic Outlook report, the IMF said Serbia’s economy is expected to expand by a real 6.5% in 2021, improving its forecast for a 5.0% increase made in April. Serbia's gross domestic product (GDP) is expected to grow by 4.5% in 2022 and by 4.0% in 2026, the IMF said in the report.