Bloomberg News

IMF May Cut Serbia’s Growth Outlook on Euro-Area Woes, Election

December 06, 2011

Dec. 6 (Bloomberg) -- Serbia’s reliance on exports to the European Union and adjacent markets may reduce its prospects for growth in 2012, an International Monetary Fund official said.

With almost 85 percent of Serbian exports sent to EU states or aspiring members, a protracted crisis in the euro area could lead to another revision of Serbia’s growth outlook for next year, country representative Bogdan Lissovolik wrote in an article published today by the Belgrade-based Economics Institute Institute. The IMF last month cut its forecast for 2012 growth in the Balkan state to 1.5 percent from 3 percent.

“Serbia’s economic growth already slowed in the second quarter to a great extent due to smaller activity in the euro zone,” Lissovolik said in the text. “If financial tensions in the euro zone continue, the risk of downward revision of Serbia’s economic growth will probably materialize.”

Serbia, which has an ongoing, $1.48 billion precautionary arrangement with the IMF, may exceed the self-imposed limit for public debt of 45 percent of gross domestic product and its new law on public-private partnerships may create even more debt, Lissovolik said in an appearance today at the presentation of the Institute’s monthly macroeconomic report.

The IMF “would like that the Finance Ministry has veto power to block fiscally irresponsible public-private partnerships,” he said.

The country is “approaching elections when spending is more politically driven than economy-driven,” and the authorities are likely to put off “the most important structural reforms the country needs.” Serbia may hold national elections next year in the second quarter.

Serbia has agreed with the IMF to keep its budget gap at 4.25 percent of GDP next year, down from this year’s 4.5 percent and still above an initially planned 3.9 percent.

--Editors: Douglas Lytle, James M. Gomez

To contact the reporter on this story: Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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