IMF sees pos­i­tive macroe­co­nomic trends in Ser­bia

The Pak Banker - - COMPANIES/BOSS -

An In­ter­na­tional Mon­e­tary Fund (IMF) mis­sion, led by James Roaf, vis­ited Bel­grade dur­ing Fe­bru­ary 18-26, 2016, to ini­ti­ate dis­cus­sions on the fourth re­view un­der Ser­bia's pre­cau­tion­ary Stand-By Ar­range­ment (SBA) with the IMF.

At the con­clu­sion of the visit, Mr. Roaf said, "The IMF mis­sion had con­struc­tive dis­cus­sions with the au­thor­i­ties on poli­cies needed to com­plete the fourth re­view un­der the SBA. While con­sid­er­able progress has been made in im­ple­ment­ing the pro­gram, due to the gen­eral elec­tions we agreed with the au­thor­i­ties to con­tinue the dis­cus­sions with a fol­low-up visit once a new govern­ment has taken of­fice." "Per­for­mance un­der Ser­bia's eco­nomic pro­gram has been strong.

All quan­ti­ta­tive per­for­mance tar­gets for endDe­cem­ber were met, most by large mar­gins. At 3.7 per­cent of GDP, the fis­cal deficit in 2015 was the low­est since 2008. And with con­fi­dence im­prov­ing and in­ter­est rates de­clin­ing, Ser­bia re­turned to pos­i­tive growth, helped by a strong pick-up in for­eign in­vest­ment. In­fla­tion has re­mained low and sta­ble, which is the most ef­fec­tive way to pro­tect the real value of wages and pen­sions. We ex­pect th­ese pos­i­tive macroe­co­nomic trends to con­tinue in 2016. Our growth pro­jec­tion is un­changed at 1.75 per­cent, while av­er­age in­fla­tion is re­vised down to 1.7 per­cent, mainly due to fur­ther de­clines in oil prices.

"How­ever, look­ing for­ward Ser­bia still faces im­por­tant chal­lenges. Pub­lic debt re­mains high, high­light­ing the im­por­tance of achiev­ing the pro­gram's struc­tural fis­cal ad­just­ment tar­gets of about 0.75 per­cent of GDP in each of 2016 and 2017. The govern­ment's am­bi­tious but nec­es­sary right­siz­ing plan is run­ning be­hind sched­ule, and would need to be ac­cel­er­ated and im­ple­mented fully.

This re­form is im­por­tant not only to re­duce the deficit, but also to im­prove the ef­fec­tive­ness of cen­tral and lo­cal gov­ern­ments, which is con­sis­tent with the au­thor­i­ties' goal of a smaller, more ef­fi­cient, and bet­ter-paid pub­lic sec­tor to de­liver bet­ter ser­vices (such as health and education) to cit­i­zens. The au­thor­i­ties re­con­firmed their com­mit­ment to en­sur­ing that the ceil­ings on em­ployee num­bers de­fined in the De­cem­ber 2015 de­ci­sion are im­ple­mented and ver­i­fied by the time of com­ple­tion of the re­view, and to move ahead in plan­ning the next stage of right­siz­ing based on in-depth func­tional re­views con­ducted with the World Bank.

"The re­struc­tur­ing of state-owned en­ter­prises, in­clud­ing util­i­ties, re­main a dif­fi­cult chal­lenge. Th­ese re­forms are vi­tal to im­prove Ser­bia's com­petive­ness, growth and em­ploy­ment. 2016 is a crit­i­cal year for re­form of EPS, Sr­bi­ja­gas and the rail­ways, and a new govern­ment will need to move rapidly to im­ple­ment re­struc­tur­ing plans for th­ese en­ti­ties.

Good progress has been made in re­solv­ing some of the strate­gic state-owned en­ter­prises cov­ered by the pro­gram, but a num­ber of dif­fi­cult cases re­main. Th­ese need to be ad­dressed in ways that min­i­mize fis­cal risks while tak­ing ac­count of so­cial and en­vi­ron­men­tal pri­or­i­ties. Ul­ti­mately, the only way to pro­tect jobs in th­ese en­ter­prises is to deeply re­struc­ture them so as to en­sure their long-term com­mer­cial vi­a­bil­ity, while pro­vid­ing needed so­cial and la­bor mar­ket as­sis­tance to re­dun­dant em­ploy­ees.

"Given the low in­fla­tion out­look and the im­proved fis­cal po­si­tion, the mis­sion sup­ports the NBS's cau­tiously ac­com­moda­tive mon­e­tary pol­icy stance. The in­fla­tion tar­get­ing frame­work serves Ser­bia well, and the mis­sion con­sid­ers that greater day-to-day flex­i­bil­ity in the ex­change rate should be ac­com­mo­dated to the ex­tent this does not jeop­ar­dize in­fla­tion tar­get­ing and fi­nan­cial sta­bil­ity.

"The fi­nan­cial sec­tor re­form agenda con­tin­ues to progress well, in par­tic­u­lar with the fi­nal­iza­tion and pub­li­ca­tion of the spe­cial di­ag­nos­tic stud­ies of bank as­set qual­ity, which con­firmed the fi­nan­cial sound­ness of all sys­temic banks. The main fo­cus of the fi­nan­cial sec­tor agenda for 2016 should be the re­form of state-owned fi­nan­cial in­sti­tu­tions to im­prove trans­parency and com­pe­ti­tion and re­duce fis­cal risk, along with im­ple­men­ta­tion of the NPL res­o­lu­tion strat­egy. "The mis­sion team is grate­ful for the au­thor­i­ties' hos­pi­tal­ity and close co­op­er­a­tion."

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.