EBRD says Serbia's macroeconomic discipline weakens, reforms progress.

By bne IntelliNews November 8, 2012
Serbia's GDP growth in 2012 will be negative at 0.7% in 2012, the EBRD estimates in its latest Transition report. Inflation, which slowed down in early 2012 is expected to reach 12% towards the end of the year, due to a combination of higher agricultural prices, a recent VAT increase and an expected increase in some regulated prices. The lender added that dinar lost 7% in nominal terms against the euro up to August, despite NBS interventions amounting to over EUR 1.35bn. Restoring fiscal prudence is essential to preserve overall macroeconomic stability, the EBRD said. The 2012 budget deficit is currently estimated at 7% of GDP ,up from 4% in 2011 and significantly exceeding the target of 4.25% of GDP that had been agreed with the IMF under the Stand-By Arrangement. It is unclear if new 2012 budget deficit target of 6.7% of the GDP will be reached. Structural reforms have advanced in several infrastructure sectors. Progress has been made in telecom sector, which became fully liberalised although the fixed-line telecommunications market remains dominated by state-owned Telecom Serbja. Furthermore, significant reform efforts are ongoing in the railways sector as the state-owner railway company was transformed into a joint-stock company in 2011, which is a step towards complete separation of infrastructure and transport, in line with EU directives. According to the EBRD, Serbia's priorities in structural reforms are increasing energy regulatory agency independence. The EBRD thus underlined regulatory independence remains limited in the power sector as final tariff levels are still determined by the Serbian government and amendments of the energy law have yet to be passed by the government. Moreover the new government announced it has no intention of privatising the state-owned power company Elektroprivreda Srbije (EPS). Priorities in financial sector include further strengthening of local capital markets as well as continuing efforts to promote dinarisation of Serbian economy.

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