September 5 (SeeNews) - The International Monetary Fund (IMF) said it has raised Serbia's economic growth forecast for 2016 to 2.5% from an earlier 1.8%, as stronger private investment and net exports have resulted in better-than-expected macroeconomic performance.
The IMF also raised its 2017 forecast to 2.75%, with the largest contribution coming from private investment supported by a continued rebound in private consumption, it said on Friday in a document published on its website.
Average CPI inflation in 2016 is projected to be 1.3%, about 1.5 percentage points lower than previously said, while it is expected to gradually rise to 3% in 2017 on account of stronger demand and higher energy prices, the fund noted.
The current account deficit is projected to continue adjusting to about 4.25% of GDP and 3.75% of GDP in 2016 and 2017, respectively, on account of buoyant exports - supported by recent FDI inflows to tradable sector - and strong remittances.
However, the outlook is subject to a range of risks, the IMF warned.
"While the UK referendum on EU membership had limited immediate financial market impact, Serbia remains susceptible to possible spillovers from regional developments and market volatility. Also, political resistance to reform from vested interests and hesitation in delivering on structural reforms and fiscal measures—particularly in the area of state-owned enterprises restructuring and continued public administration reforms—may reduce growth prospects, erode confidence, and compromise the quality and durability of fiscal adjustment," the fund explained.
Last week, the executive board of the IMF successfully completed the combined fourth and fifth reviews of Serbia’s economic performance under the Stand-By Arrangement (SBA), making available the cumulative amount of 761.6 million euro ($850.9 million) to the country.
In February 2015, the IMF approved a 1.2 billion euro SBA that aims to help Serbia restore public finances’ health, increase the stability and resilience of the financial sector and implement comprehensive structural reforms.
Serbia’s real GDP growth slowed to an annual 2.0% in the second quarter of 2016, from 3.8% in the previous quarter.
($=0.8949 euro)