December 21, 2018 / 9:31 AM / 6 months ago

Serbia's reforms 'broadly on track', IMF says

BELGRADE (Reuters) - Serbia’s economic performance was strong in 2018 and the government remains committed to progress on reforms next year, the IMF said on Friday, completing its first review of a non-financial arrangement with Belgrade.

Serbia, the largest of the six ex-Yugoslav republics, has seen its economy start to recover in the past three years after years of decline due to wars and isolation in the 1990s, followed by the 2008 global financial crisis.

In October, the IMF raised Serbia’s 2018 growth forecast to 4.2 percent from 3.5 percent, citing “dramatic” economic improvement, but forecast growth dropping to 3.5 percent in 2019 as low-base effects wane.

In a statement, the International Monetary Fund’s Executive Board said Serbia continued to implement provisions of the non-financial Policy Coordination Instrument, which are tailored for countries that do not need the IMF’s financial backing.

Serbia, whose three-year 1.2 billion euros ($1.37 billion) loan deal with the fund ended in February, needs the current non-financial arrangement to assure investors.

“Serbia’s strong economic performance continues, supported by the recovery of private consumption and robust foreign direct investments and exports ... Program implementation is broadly on track,” the IMF statement said.

In October, Belgrade and the IMF agreed over a 2019 fiscal deficit target of 0.5 percent of gross domestic product (GDP). Serbia is expected to end 2018 with a small surplus.

The fund said that Serbia’s 2019 budget safeguards fiscal adjustment made in recent years and foresees a further decline in public debt, while accommodating higher investments and unwinding of crisis-era austerity measures.

Serbian inflation fell to 1.9 percent in November from 2.2 percent a month earlier, inside the central bank’s target of 3 percent, give or take 1.5 percentage points.

Serbian authorities are committed to making progress on reforms in 2019 to foster private sector-led growth and ensure the country is bound for faster convergence with income levels of the European Union that it wants to join, the IMF said.

Reporting by Aleksandar Vasovic; Editing by Mark Heinrich

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