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IMF issues upbeat view of Serbian economy
November 7, 2007
SERBIANNA

Chief of IMF mission to Serbia, Paul Hilbers, said that Serbia's economic growth for 2007 is robust while inflation has been reduced to below 4.5% from 14% that was 2 years ago and thenurged the government to cut spending in 2008 and speed up the privatization.

At a press conference, Hilbers also warned that the growth was not even across sectors citing that Serbia's mix of a loose fiscal spending, tight money and slow structural reforms create risks of sustainability of growth.

Hilbers believes that Serbia must have a budges suficit of at least 1% of GDP in 2008 in order to sustain the growth.

IMF mission visitors

The IMF mission chief also noted the growth in real wages that exceed productivity gains suggesting that the discrepancy is fueling a robust growth in domestic demand which is met by growth of imports. Growth in imports is partially met by foreign borrowing which is increasing the indebtedness of the nation.

Echoing the IMF assessment, Serbian Deputy Prime Minister Bozidar Djelic noted that the expected 7% growth puts Serbia as the highest growth economy in Europe.

Despite the current 21% unemployment, Djelic said that the trend is down from 70% just few years ago and said that Serbia is well on the way of sustainable growth which, according to him, will be "based on expertise, energy efficiency and recycling of secondary raw materials."

Djelic said that funds for building a highway called Corridor 10 have been secured and the project could be done in 3 years and can be a boon for the southern Serbia. Ethnic Albanians in southern Serbia, however, are threatening violence.

Djelic noted that an average salary in Serbia is about €350 that is higher then in Bulgaria which is an EU country. Djelic blamed Serbia's high foreign trade deficit on gas and oil imports.

Official IMF report on Serbia is expected in January.

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