Serbia’s economy will contract 1.5 percent this year and rebound in 2013, as agriculture recovers and Fiat SpA increases car exports from the Balkan country, the World Bank’s Western Balkan Director Jane Armitage said.
The economy is expected to grow “at least 2.5 percent next year,” Armitage told reporters in the capital Belgrade today. The World Bank will step up support for Serbia and other western Balkan countries to help reduce their budget deficits and reduce the size of the public sector, Armitage said.
International lenders pledged yesterday more than 30 billion euros in the next two years to eastern Europe to shield it from the impact of the euro area’s debt crisis.
As part of the plan, Serbia will receive $400 million in support next year and a further $200 million in 2014, Armitage said. Serbia does not need any cash this year “following a successful Eurobond issuance” in September, she said.
An International Monetary Fund mission is due in Belgrade on Nov. 13 for the first round of talks on a new loan program and will return by February for final discussions. The government “has taken some very important and courageous steps” including an increase in the sales tax and excise duties to bolster budget revenue and made efforts to restrain public wages, Armitage said.
The western Balkans, which also include Albania, Bosnia-Herzegovina, the former Yugoslav republic of Macedonia, Kosovo and Montenegro, has been hit by a “double-dip recession” because of the sovereign debt crisis in Europe. The region needs investment in infrastructure, mainly transport and energy, Armitage said.
“Billions of dollars of investments are needed” and those necessary investments in infrastructure “will have to go hand in hand with structural reforms,” she said. Serbia will need to reduce the public wage and pension bill, which together account for 24 percent of gross domestic product, to release cash for investment, Armitage said.