Head of IMF Mission: Serbian Economy Resilient, Big Investments and Spendings for Salaries and Pensions Should Be Taken Care Of

The Mission of the International Monetary Fund, led by Donal McGettigan, is staring the talks with the Government of Serbia tomorrow about the third review of the arrangement that Serbia has with the Fund. They will talk about budget expenditures for capital investments, but also the reforms in public companies, such as EPS and Srbijagas.

The head of the Mission, Donal McGettigan, says for RTS that the Serbian economy is resilient and that it has resisted global shocks impressively.

When asked how he would describe the Serbian economy, he said – resilient.

– That’s how I see the Serbian economy. It has resisted the recent global shocks impressively. The growth continues, and the inflation is reducing. The public debt is below 60% of the GDP and continues to drop. The reserves are at a record-high level. All this speaks in favor of strong macroeconomic indicators and the resilience of the Serbian economy – said McGettigan.

He pointed out that Serbia was facing the challenge of continuing to strengthen the macroeconomic stability and having a strong sustainable growth.

– That requires more than just macroeconomic stability. It requires solving deeper, fundamental strategic issues. This will help create a strong, sustainable, inclusive and ecological growth – he said.

Talking about the inflow of direct foreign investments, McGettigan said that they were very strong and varied, but also resilient.

– This is down to the firm macroeconomic policy, macroeconomic stability and the extraordinary geographic position of Serbia. At the International Monetary Fund, in our latest economic projections on the global level, we expect Europe to recover, which should, at the very least, help Serbia regarding direct foreign investments.

When asked about the planned investments of over EUR 17 billion in the next four years in EXPO and whether he believed it was risky in terms of the public debt, as there was no cheap money in the market, he said that he certainly considered the public investments high and strong and fitting with the state of the public debt and solid public finances.

– If we look back on the past several years, Serbia has had plenty of public investments, and that coincided with the reduction of the public debt, stable public finances and a good outlook for the sustainability of the public debt. The reason for that is that this investment is carried out in the context of firm fiscal management and, especially, a strong control of the spendings for pensions and salaries, which is very expensive. That is why we believe that it is necessary to take care of those big investments and big spendings and that new fiscal rules should be strictly adhered to. It is also necessary to manage the public investments well and make sure that they are carefully chosen – McGettigan said.

If so, he added, with the further development of public investments, it will additionally strengthen the public finances, and this will further strengthen the infrastructure of the country and strongly incite a stable, sustainable growth.

Regarding the inflation and whether it was time to relax the monetary policy and reduce the interest rates, he said that the inflation was reducing anyway, “which is a consequence of the firm monetary policy of the National Bank of Serbia and a sign that the inflation shocks in the world are weakening,” but added that it was too soon to declare victory over the inflation.

– Before the rates are reduced, there need to be clear signs that the inflation is being put under control in a safe way. What does that mean? We should closely monitor the inflation expectations, ensure that the reduction is firmly controlled by the National Bank of Serbia, make sure that the total inflation continues dropping, as well as the base inflation, and take care of a wider development, such as the labor market and the growth of personal income, so that they would follow the permanent reduction of the inflation. When all this is as it should be and if attention is paid to the inflation, a reduction of interest rates can be considered – concluded McGettigan.

Međunarodni monetarni fond-MMF Beograd

IMF Mission

Donal McGettigan

inflation in Serbia

EXPO 2027 investments

direct foreign investments

Serbian economy assessment