Belgrade and the International Monetary Fund have reached a staff-level understanding on the third review of a 36-month reform arrangement, the IMF said on Wednesday. The Policy Coordination Instrument (PCI) was signed in October 2024 to ease Serbia's access to lending from other sources, and the latest review - which assesses compliance with the agreement's terms - now awaits approval by the IMF Executive Board.
In its statement following the mission's visit, the Washington-based lender set out its growth and inflation outlook for Serbia while noting external risks. The IMF expects Serbia's economic growth to rise to 2.75% in the current year but cautioned that spillovers from the war in the Middle East will weigh on activity.
Looking further ahead, the IMF projects growth of 4% in 2027. That uptick is expected to be supported by several factors cited in the IMF statement: spending related to EXPO activities, gains in real incomes, the development of new export capacity within the manufacturing sector, a recovery in agricultural output, and investments in infrastructure and energy.
On price dynamics, the IMF noted an upward trajectory in inflation, projecting a moderate increase to 3.5% in 2026 and to 4.5% in 2027. The lender attributed that rise to higher global energy and commodity prices. It also warned that monetary policy may need to tighten if elevated energy costs become embedded in long-term inflation expectations and lead to second-round effects.
Fiscal policy commitments form a central part of the arrangement. Under the PCI, Serbian authorities have pledged to cap the fiscal deficit at 3% of gross domestic product in 2026 and 2027, and to adhere to special fiscal rules governing public wages and pensions. These constraints are intended to support fiscal sustainability while reforms proceed.
The IMF also commented on recent temporary measures aimed at cushioning an oil price shock. Fuel excise reductions introduced in March-April 2026 have provided near-term relief, the statement said, but those measures should be withdrawn in the near term to avoid prolonged energy subsidisation and to safeguard fiscal sustainability.
The staff-level agreement advances Serbia's standing under the PCI but remains subject to formal approval by the IMF Executive Board. The IMF's statement closes the mission's review with an emphasis on maintaining the fiscal and monetary guardrails outlined in the arrangement.