Bloomberg News

Serbia Adopts 2012 Budget, Targeting Narrower Deficit

December 29, 2011

Dec. 29 (Bloomberg) -- Serbia, which holds national elections next year, adopted a spending plan for 2012 that seeks to narrow its budget deficit to 4.25 percent of gross domestic product amid forecasts for slowing growth.

A total of 127 lawmakers in the 250-seat legislature voted to back the spending plan which counts on economic growth of 1.5 percent compared with 2 percent in 2011, while opposition parties boycotted the vote. Half of the 890 billion dinars ($11 billion) in spending will go to pay wages of public administration workers, teachers, doctors, police and pensioners.

The 2012 budget relies on revenue of 750 billion dinars, leaving a gap of 140 billion dinars for the central government, a quarter-point below the limit of 4.5 percent of GDP set by Serbian law.

Labeled by the government of Mirko Cvetkovic as “anti-crisis,” next year’s budget is based on expectations that troubles in the European Union, the Balkan country’s key trading partner, won’t tip the economy into recession.

“The 2012 budget envisages active support measures for agriculture, real sector, subsidies and soft credits, and there’s no plan for a tax increase or any additional burdens,” Premier Cvetkovic told parliament on Dec. 26.

IMF Agreement

Keeping the gap within 4.25 percent of GDP was agreed on with the International Monetary Fund, which in September approved a 1 billion-euro ($1.3 billion) precautionary loan for Serbia in case Europe’s debt crisis triggers capital flight from the Balkan economy, putting pressure on its currency and the balance of payments. The government estimates a 4.5 percent deficit for 2011.

The 2012 budget will be one of the last laws adopted by this parliament before elections are called for late April or early May, speaker Slavica Djukic-Dejanovic said on Dec. 26.

Serbia is still emerging from its worst recession in a decade and the government is trying to keep spending under control and boost tax collection without cutting social benefits. The government will increase subsidies for tourism, agriculture, roads and railways and is keen on allowing a 5.5 percent annual increase in public wages and pensions affecting as many as 2 million voters ahead of elections.

--Editors: Douglas Lytle, Jim Silver.

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

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


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