Serbia To Exit Crisis in Q1 2010 - Econ Min

“Serbia’s economic fall is coming to a halt.[...] Our projection is that Serbia’s 2009 gross domestic product will shrink 3.0%, which is better than our earlier projections of 4.0%,” Dinkic told a news conference.

Serbia’s government projection is the same as that of the country’s central bank. The International Monetary Fund (IMF) has said in its latest forecast that Serbia’s economy will contract by 4.0% in 2009.

Dinkic confirmed an earlier government forecast that Serbia’s budget gap will be equivalent to 4.5% of gross domestic product (GDP) this year as projected in the country's two-year, 3.0 billion euro ($4.5 billion) stand-by funding deal with the IMF.

The global lender has agreed to a rise in Serbia's 2009 budget deficit forecast to 4.5% of GDP from 3.0% projected initially, and to a freeze of taxes, salaries and pensions in 2010 in exchange for an overhaul of the public sector. An IMF mission is scheduled to arrive in Belgrade later this month to review the country’s performance under the funding arrangement and decide whether Serbia has qualified for receiving further tranches totalling 1.4 billion euro.

The country’s budget deficit will total 4.0% of the projected GDP next year, Dinkic said. IMF Resident Representative in Serbia Bogdan Lissovolik said last month that the Balkan country should aim for a budget deficit of 3.5% of GDP next year to strengthen its fiscal balance.

“Serbia’s public revenue, as of October 8, is at the same level as it was a year ago. We expect that our 2009 revenue will be between 10 billion dinars ($159.2 million/107.6 million euro) and 15 billion dinars higher than forecast initially. I expect our 2009 revenue will be about 2.0% higher than last year’s,” Dinkic also said.  

“This affords us a slightly more comfortable position in our negotiations with the IMF.”

Belgrade will need 1.6 billion euro to bridge its budget gaps in 2009 and 2010, Dinkic said and added that global lenders will lend the Balkan country 1.8 billion euro.

The Finance Ministry will stop selling Treasury Bills in the second half of 2010 as the government starts withdrawing from the market as Serbia exits the crisis, Dinkic added. Serbia holds scheduled auctions of six-month T-bills every week on Thursdays and of three-month T-bills on Tuesdays. It started holding auctions of 12-month T-bills in August in a bid to narrow the country's yawning budget gap.

Serbia adopted its first law allowing for cuts in public administration last week, Dinkic said. He added that the government will adopt a law on public employees and a law on the maximum number of those employed in local administrations later this week.

Serbia’s improving economic situation was partly helped by the government’s soft loan programme, launched earlier this year and aimed at softening the blow of the crisis on local economy, Dinkic said. Commercial banks in Serbia have lent local companies about 900 million euro in soft loans so far this year.

The IMF projects Serbia's economy will grow by 1.5% next year.

(1 euro=92.9767 Serbian dinars)