The Global and Serbia’s EconomyCFO Summit

Arandjelovac, June 1, 2012

Bogdan Lissovolik IMF Resident Representative for Serbia

OutlineOutline

Where are we?

Where are we going?

What are the risks?

What needs to be done?

Serbia’s economy?

Where are we?Where are we?

Output Growth, 2011Q4

1950 1960 1970 1980 1990 2000 2010 170

20

40

60

80

100

120

140Advanced economies Emerging and developing economiesWorld G7

Where are we?Where are we?

Public Debt(% of GDP)

Where are we?Where are we?

10-Year Government Bond Yields

1/5/2007 1/5/2009 1/5/20110

1

2

3

4

5

6

7

8Germany France Italy Spain

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

2

4

6

8

10

12G7 Euro area Other advanced

Where are we?Where are we?

Unemployment rates

Where are we going?Where are we going?

Output Growth, 2012-13

What are the risks?What are the risks?

RISK 1:Euro Area

Crisis

RISK 2:Oil Prices

BANKSBANKS

viciouscycles

FISCALFISCAL

GROWTHGROWTH

What are the risks?What are the risks?

What needs to be done? (policies)What needs to be done? (policies)

Fiscal policies: appropriate pace of consolidation

Monetary and liquidity policies – balanced

Well-coordinated policy package

Structural reforms to boost long-term productivity and employment

Support for the unemployed (social policies)

More international coordination of macro-financial policies

Strengthening the global firewall

Macro-prudential policies need to be strengthened

What needs to be done? (regions/countries)What needs to be done? (regions/countries)

Building a stronger currency union•Improved fiscal rules and institutions

Strengthening banking systems

Euro Area

What needs to be done? (countries)What needs to be done? (countries)

Fostering domestic consumption, including through more exchange rate flexibility

Economies with Large External Surpluses

Economies with Large External Deficits

Developing a domestic policy mix to gradually rebalance toward a sustainable export-oriented growth, based on FDI and prudent macroeconomic policies

Serbia: the “old-model” problem…

Serbia: Still-large External Deficit

-25

-20

-15

-10

-5

0

-25

-20

-15

-10

-5

0

2004 2005 2006 2007 2008 2009 2010 2011

Current Account Deficit(percent of GDP)

Serbia SEE /1 CEE 2/

1/ Albania, Bosnia and Hercegovina, Croatia and Macedonia FYR.2/ New EU-10 excluding the Baltics.

With real wage outpacing productivity

Serbia: What to do?

✤ 1. Fiscal consolidation (including the spending side of the budget)

✤ 2. Product market reforms

✤ 3. Labor market reforms

✤ Examples:

Control public spending

0

10

20

30

40

50

60

Arm

en

ia

Alb

an

ia

Ma

ce

don

ia

Bu

lga

ria

Sw

itze

rla

nd

Ro

ma

nia

Ru

ssia

Slo

va

k R

ep

ub

lic

Be

laru

s

Mo

ldo

va

Lith

ua

nia

La

tvia

Cro

atia

Un

ite

d S

tate

s

Lu

xe

mbo

urg

Esto

nia

Sp

ain

Ire

lan

d

No

rwa

y

Po

lan

d

Cze

ch

Re

pu

blic

Ge

rma

ny

Un

ite

d K

ing

do

m

Se

rbia

Ice

lan

d

Slo

ve

nia

Hu

ng

ary

Po

rtu

ga

l

Sw

ed

en

Bo

sn

ia a

nd

He

rze

go

vin

a

Gre

ece

Ita

ly

Ne

the

rla

nds

Au

str

ia

Be

lgiu

m

Fin

lan

d

De

nm

ark

Fra

nce

Sources: National authorities, IMF, and staff estimates

Figure 8. General Government Expenditure in Selected Economies, 2011 (percent of GDP)

sample average

Attract the right kind of FDI

0

1000

2000

3000

4000

5000

2004 2005 2006 2007 2008 2009 2010 2011*

Manufacturing Wholesale and retail trade, repair

Transport, storage and communications Financial intermediation

Real estate, renting and business activities Other

Gross FDI by branch of activity, million euro

Reform severance benefits

Thank You