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BELGRADE, May 24 (Reuters) - Serbia’s central bank on Tuesday revised the country’s 2016 growth to between 2.25 to 2.5 percent from 1.8 percent citing an increase in investment and rise in exports.
In its quarterly report on inflation the bank said higher investment would be driven by implementation of major infrastructure projects, lower interest rates and low fuel prices.
“Real growth in exports in the first quarter stood at 13 percent year-on-year, while import growth slowed to 4 percent year-on-year,” the bank said in the report.
The bank said it expected its monetary policy to remain “expansionary” in the coming period due to low inflationary pressure. Inflation in Serbia stood at 0.4 percent in April, way below the central bank’s target range of between 2.5 and 5.5 percent.
But the bank refrained from a rate cut last week due to the possibility of a U.S. rate hike, which would make emerging markets such as Serbia relatively less attractive.
The U.S. Federal Reserve raised rates in December for the first time in nearly a decade, but has kept them on hold since then largely because of worries over a slowdown in China and Europe. It is now expected to hike again in the third quarter, most likely in September.
“Further monetary policy easing will depend on inflationary effects ... above all movements on international financial and commodity markets,” the Serbian central bank said.
Serbia, the biggest of the former Yugoslav republics, is expected to inaugurate a new government next month following an election on April 24.
The new government’s main task will be to implement spending cuts, including public sector lay-offs, in accordance with a 1.2 million euro loan deal with the International Monetary Fund in order to curb debt that now stands at 75 percent of gross domestic product. (Reporting by Ivana Sekularac; editing by Giles Elgood)