BELGRADE, June 9 (Reuters) - Serbia has no scope to raise public sector wages and pensions this year and can do so next year only if it finds additional fiscal savings, the head of an International Monetary Fund mission was quoted on Thursday as saying.
Under the terms of its 1.2 billion euro ($1.4 billion) IMF loan deal, Serbia must cut debt and slim its public sector, steps also required to support the Balkan country’s bid to join the European Union.
Last year Serbia’s fiscal performance improved and inflation remained subdued, allowing for a slight rise in public sector wages and pensions that had been cut in 2014. But Belgrade must still complete a long-delayed offload of remaining state firms.
James Roaf, head of an IMF mission which arrived on Thursday to start reviewing Serbia’s compliance with its loan deal, struck a cautious note in an interview for the NIN weekly magazine.
“Not only are increases of wages and pensions out of the question in 2016 but, unless the government can identify significant new fiscal savings ... we do not see space for them (increases) in 2017 either,” Roaf told the weekly.
To comply with the terms of the IMF deal, Prime Minister Aleksandar Vucic’s new government - which is still being formed after an April 24 election - must cut a public sector which now employs 750,000 people, more than 10 percent of Serbia’s total population.
Roaf said the IMF mission was likely to raise its growth forecast of 1.75 percent for Serbia in 2016. The economy grew 3.5 percent year-on-year in the first quarter of 2016, up from 1.2 percent in the fourth quarter of 2015.
In May, Serbia’s central bank revised its 2016 growth estimate upwards to between 2.25 and 2.5 percent from 1.8 percent, citing an increase in investment and rise in exports. (Reporting by Aleksandar Vasovic; Editing by Gareth Jones)