In preliminary findings following a mission to Belgrade, International Monetary Fund staff and the Serbian authorities reached a staff-level agreement on the third review under Serbia's Policy Coordination Instrument, subject to management and Executive Board approval. The mission said spillovers from the war in the Middle East are raising energy costs and uncertainty, with growth projected at about 2.75 percent in 2026 before rising to 4 percent in 2027, supported in part by EXPO-related spending, while inflation is expected at 3.5 percent in 2026 and 4.5 percent in 2027 and to temporarily move above the central bank's tolerance band in late 2026 before returning by mid-2027. Program commitments include a 3.0 percent of GDP fiscal deficit ceiling in 2026-27 and special fiscal rules on public wages and pensions, alongside a near-term withdrawal of fuel excise cuts introduced in March-April 2026 to avoid prolonged energy subsidization. Monetary policy should remain cautious and could need tightening if higher energy prices feed into longer-term inflation expectations or other second-round effects. In a materially worse oil-price scenario, Serbia would use temporary targeted support for vulnerable households while seeking to stay within the deficit ceiling through further reprioritization of capital spending. Staff also highlighted structural priorities including a first actuarial analysis of the pension system, a first tax expenditure report, stronger VAT compliance, systematic cost-benefit analysis for new public investment projects, energy state-owned enterprise reform, and faster business environment improvements. IMF staff will now prepare a report, subject to management approval, for Executive Board discussion and decision on completion of the review. The authorities and IMF staff will remain in close consultation as economic conditions evolve.
International Monetary Fund 2026-05-06
International Monetary Fund staff reaches staff-level agreement on Serbia's third Policy Coordination Instrument review
International Monetary Fund staff and Serbian authorities have reached a staff-level agreement on the third review under Serbia’s Policy Coordination Instrument, pending management and Executive Board approval. The program sets a fiscal deficit ceiling of 3.0 percent of GDP in 2026-27, withdrawal of recent fuel excise cuts, cautious monetary policy with possible tightening if energy price shocks persist, and contingency measures based on targeted support and capital spending reprioritization. Structural priorities include actuarial and tax expenditure analyses, stronger VAT compliance, more rigorous public investment appraisal, energy SOE reform, and faster business environment improvements.