Serbia’s GDP to Drop in 2009, PM Says

Belgrade – The global crisis will hit Serbia in 2009 and the impact will result in a significant drop to the gross domestic product, Prime Minister Mirko Cvetkovic claims.

“This will clearly be a recession as the GDP will be lowered to 4 percent in comparison to the 7 percent we had over past several years,” Cvetkovic said at a panel discussion in Belgrade on Monday.

The Prime Minister opted to use the word ‘recession’ even though this qualifies as two financial quarters of negative economic growth.

“The wave of the crisis will hit our shores in 2009,” he said.

To combat effects of this, Serbia must adopt more restrictive fiscal policies and cut spending, while experts from the government and the International Monetary Fund will intensify their work on the 2009 draft budget.

“Our mid-term goal is to keep the budget deficit below 2 percent of the GDP and to keep public spending below 44 percent of the GDP,” Cvetkovic said.

Previously top officials said that in 2008, Serbia’s GDP will be between 7 percent and 7.5 percent, while headline inflation will remain a single-digit figure. Serbian lawmakers are currently debating a proposed revision to the 2008 budget that will raise the budget deficit to 1.7 percent of the GDP from the previously set 0.5 percent of the GDP.

Earlier Finance Minister Dijana Dragutinovic said the revision of the budget was prompted by expenditures of €200 million needed for the establishment of a joint venture between Serbia’s Zastava carmaker and Italy’s Fiat, a €250 million allotment for the development of a motorway network dubbed Corridor 10 and a ten percent hike in pensions expected in November.