Abstract
This 2010 Article IV Consultation highlights that the authorities’ adjustment program has contributed to limiting the fallout of the global crisis on Serbia. Although the output slump has been limited relative to regional peers, the decline in domestic demand has been significant, resulting in a strong external adjustment. The outlook for 2010 points to a slow but balanced recovery. The pickup in growth will likely be moderate, reflecting slow trading-partner recovery, protracted corporate deleveraging, nominal freezes in public wages and pensions, and lagging labor market adjustment.
1. This statement summarizes economic developments and policy actions in Serbia since the issuance of the staff report. The additional information does not change the thrust of the staff appraisal.
2. On March 23, the NBS lowered its policy interest rate by 50 basis points to 9 percent, against a backdrop of monthly CPI inflation rates (3.9 percent, y-o-y, in February) below the NBS’s tolerance band, while one-year ahead inflation expectations of financial market participants have continued to trend downward.
3. National Bank of Serbia (NBS) Governor Jelašić has announced his resignation for personal reasons. The Parliament’s finance committee is expected to formalize the decision in the next few weeks, and nominate the successor. Mr. Jelašić will continue to exercise his functions until the new Governor takes office.
4. The government adopted a new small program of subsidized consumer cash loans in dinars to support domestic demand. The budget cost of the additional interest subsidies could amount to up to 0.5 billion dinars, to be financed through existing budget allocations, while the take-up of the subsidized loans could reach up to 0.3 percent of GDP. In addition, the government decided that all other subsidized consumer loans will also only be extended in dinars.
5. The authorities announced a decision to sell a 40 percent stake in Telekom later this year through an international tender. The preliminary plan is to channel the potentially significant proceeds to a special fund, which would finance infrastructure investment.