Serbia Needs $6.5 Billion to Close Current-Account Gap

Serbia will need at least 5 billion euros ($6.5 billion) through 2015 to help close its current- account deficit, even as foreign direct investments and borrowing abroad pick up, a private Belgrade institute said.

The three-year gap will amount to about 11.1 billion euros until 2015, the Economics Institute estimated in its December report today. Serbia will also need to repay 12.2 billion euros in maturing debts by 2015, when liabilities will total 23.3 billion euros, compared with expected inflows of 17.6 billion euros in foreign investments, private-sector loans and government borrowing, it said.

“Serbia faces a shortage of some 5.5 billion euros in the next three years and foreign currency reserves may melt down,” the Institute said in an e-mailed report.

Relying on foreign-exchange reserves, which stood at 10.16 billion euros at the end of October, to finance the gap would erode reserves to cover only three months of imports, the report said.

If the government chooses to “maintain the level of the reserves through 2015 with minor oscillations” the adjustment would need to come through “a sharp reduction in the foreign trade gap” and “significant dinar depreciation,” according to the report.

The economy is expected to grow 2 percent next year after a 2 percent contraction in 2012.

Prime Minister Ivica Dacic’s Cabinet, in office since July 27, plans inflation to remain under control and the dinar to stay stable. It also foresees cutting the fiscal gap to 3.6 percent of economic output next year from 6.7 percent of GDP in 2012.

The International Monetary Fund and the Fiscal Council see the fiscal tightening as overly ambitious.

To contact the reporter on this story: Gordana Filipovic in Belgrade at

To contact the editor responsible for this story: James M. Gomez at

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