Serb Fiscal Gap to Reach 6.8% in 2012 With No Austerity Cuts

Serbia’s fiscal deficit will reach 6.8 percent of gross domestic product this year if the government does nothing to implement savings, the Finance Ministry said.

The gap would reach 225 billion dinars, it estimated. For next year, the shortfall may rise to 7.7 percent of GDP, or 254.8 billion dinars, if assistance for troubled banks is included, the ministry said in a statement handed out to reporters today in Belgrade.

The country’s public debt stood at 15.3 billion euros, Finance Minister Mladjan Dinkic said at the conference discussing the new government’s fiscal plans. That amounts to 53.4 percent of GDP at the end of June, according to ministry accounting, and 55 percent by central bank methodology.

The new government will lower the public debt level with deficit cuts, he said. The state will pay 3.67 billion euros to service its public debt and Dinkic said he is “certain” the nation will lower its financing needs to below 4 billion euros in 2013 from this year’s 4.4 billion euros and below 3 percent in 2014.

On taxes, Dinkic said any tax increase won’t take the value-added tax rate, now at 18 percent, above 20 percent. VAT on food and other staples will remain at 8 percent, Dinkic said.

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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