May 24 (SeeNews) - The Council of the European Union said it expects Serbia's economic growth to accelerate slightly, increasingly underpinned by private consumption, while investment and exports are expected to remain robust.
The pace of consolidation is planned to slow down significantly, although its path needs to be more ambitious in light of remaining fiscal vulnerabilities, the Council of the European Union said on Tuesday in a statement on the joint conclusions of the bloc's economic and financial dialogue with the Western Balkans and Turkey.
The Council has invited Serbia to use any additional fiscal space to lower the deficit beyond the targets that are currently envisaged while continuing to increase capital expenditure, as well as to adopt a credible and binding system of fiscal rules, capable of anchoring consolidation efforts.
Serbia should also support the fiscal scenario by reinvigorating reforms of the state-owned enterprises and of the tax administration, improve the composition of budget expenditure by further reducing public spending on wages and pensions as a share of GDP, the Council of the EU said.
The Council recommended to Serbia to implement the remaining measures of the non-performing loan (NPL) resolution strategy, continue efforts to promote the use of the dinar, finalise the reform and privatisation of the two large state-owned banks and find a solution for the remaining small state-owned banks.
Moreover, Serbia should gradually adjust electricity tariffs to reflect actual costs, improve payment collection and avoid future accumulation of arrears in the energy sector, advance the announced restructuring of gas monopoly Srbijagas debt and the implementation of the optimisation plan of state-run power utility Elektroprivreda Srbije (EPS), the Council of the EU noted.
Other recommendations include the regulation of the amount and number of para-fiscal charges at a state level, increasing labour market participation and reducing the high non-wage labour cost of jobs at the lower sections of the wage distribution in a fiscally neutral way.
Earlier this month, the European Commission said it has increased its forecast for Serbia’s economic expansion in 2017 to 3.2% from 3.0% projected in February, as domestic demand is picking up. Gross domestic product (GDP) growth is expected to accelerate to 3.6% in 2018 when the budget balance is forecast to outperform targets and turn to a small surplus, the Commission said in its Spring 2017 Economic Forecast.