Serbian economy recovering slowly

Serbian economy recovering slowly

Hit by the global financial crisis, the Serbian economy contracted 3% in 2009. The economy rebounded in 2010 with real GDP growth rate of 1.8%, fuelled by increased private sector investment, exports and consumption. The International Monetary Fund (IMF) forecasts growth of 2% in 2011, and 3% in 2012.

In January 2009, Serbia and the IMF entered into a Stand-By Agreement (SBA) loan of 409 500 000 euros to refinance Serbia’s debt. Then in August 2011, the IMF approved another 1 000 000 000 euros loan to support economic programs and structural reforms.

To secure the loans, Serbia agreed to cap its fiscal deficit to 4,5% of GDP in 2011 and 4% of GDP in 2012. This will mean deep cuts in subsidies, net lending operations, and non-priority spending on capital and goods and services.

From 2002 to 2009, the country reduced inflation to an average of 9,9% per year. Serbia’s inflation rate is expected to rise to 11,25% in 2011, from just 6,1% in 2010. At end-June 2011, the inflation rate was 12,5%, according to the National Bank of Serbia.