IMF Concludes Third Review of Serbia's Stand-By Arrangement

The IMF reports that Serbia’s program is on track, with all quantitative performance criteria and indicative targets being met.

The Executive Board of the International Monetary Fund (IMF) has completed the Third Review Under the Stand-By Arrangement (SBA) for the Republic of Serbia. The SBA, amounting to approximately SDR 1.89 billion (about EUR 2.4 billion), was initially approved by the IMF’s Board on December 19, 2022 (see Press Release No. 22/447). With the conclusion of this review, Serbia gains access to around EUR 400 million (SDR 316.46 million), although the authorities plan to treat the SBA as precautionary and do not intend to utilize the available funds.

Economic Outlook

With the diminishing impact of the energy crisis, Serbia's economic growth is projected to rise to nearly 4 percent in 2024, supported by a robust labor market, real wage increases, and higher investment levels. Annual inflation decreased to 4.5 percent in May 2024, aligning with the National Bank of Serbia’s target range. However, the current account deficit is expected to widen to around 4 percent in 2024 as domestic demand strengthens, with continued robust foreign direct investment enabling further reserve accumulation.

Fiscal and Structural Reforms

The 2024 budget anticipates a fiscal deficit of 2.2 percent of GDP. Nevertheless, ambitious infrastructure investments under the government's "Leap into the future—Serbia EXPO 2027" development plan foresee higher medium-term fiscal deficits than previously expected, with projections indicating deficits of 2.5 percent of GDP in 2025 and 2.25 percent through 2027. Despite increased public investment, public debt is projected to continue on a downward trajectory.

The IMF reports that Serbia’s program is on track, with all quantitative performance criteria and indicative targets being met. Structural reform momentum has been maintained, particularly in the energy sector, where tariff reforms have improved the financial health of state-owned enterprises (SOEs), reducing fiscal risks. Continued focus on structural reforms, particularly in energy sector and SOE governance, energy pricing, public investment management, and broader fiscal structural reforms, is expected to address Serbia's remaining vulnerabilities and support long-term growth.

IMF Statement

Antoinette Sayeh, Deputy Managing Director of the IMF, commended Serbia’s recovery and ongoing efforts:

“Serbia continues to recover well from the recent energy crisis, supported by the authorities’ strong performance under the Stand-By Arrangement. Growth is recovering, inflation is falling, and fiscal and external buffers have increased. The finances of energy state enterprises have improved, moderating fiscal risks.

“The return of inflation to the central bank’s target band in May is welcome. Maintaining an appropriately tight monetary policy stance will help guard against remaining inflation risks. Serbia’s financial sector appears sound while ongoing vigilance is advisable.

“Pursuing prudent fiscal policy remains a priority. While higher public investment is needed, the authorities’ new plans mean that fiscal deficits will be higher than under the deficit component of the fiscal rule, which is, as a result, being delayed. Careful prioritization of investment projects, greater transparency, close monitoring of cost pressures, and broader public investment management reforms will help deliver value for money.

“Additional changes to energy pricing and to energy state-owned enterprise (SOE) corporate governance will help bolster their financial positions, make room for energy investment, and contain fiscal risks. Also, progress with broader SOE governance and fiscal structural reforms continues.”

Visual Elements

Graph of Serbia's GDP Growth: Showing projected increase to nearly 4 percent in 2024.

Chart of Inflation Rates: Highlighting the decline to 4.5 percent in May 2024.

Infographic on Fiscal Deficit: Illustrating the expected fiscal deficits and public investment under the "Leap into the future—Serbia EXPO 2027" plan.

Sidebar

Key Points

Serbia's economic growth projected to reach nearly 4 percent in 2024.

Inflation aligns with the National Bank of Serbia’s target range at 4.5 percent in May 2024.

Fiscal deficit for 2024 anticipated at 2.2 percent of GDP.

Public investment under "Leap into the future—Serbia EXPO 2027" to increase medium-term fiscal deficits.

Structural reforms in the energy sector have improved the financial health of state-owned enterprises.

This positive review by the IMF underscores Serbia's successful recovery and continued progress in economic and fiscal reforms, paving the way for sustainable growth and stability.