Mark Allen, the senior regional representative of the International Monetary Fund (IMF) for central Europe, has stated that Serbia budget 2012 will have a projected deficit of 4.25% of the GDP. This decision has been taken in agreement with the world financial body.
In August this rate was forecast at 4 percent but was later increased because of mounting public debt. Earlier on the IMF had stated that Serbia�s budgetary deficit should be limited to 3.9 percent of its GDP but with the latest target, the Balkan country will have an additional 25 million euros. This is a big amount given the present economic condition in the European country.
Highlights of Serbia Budget 2012:
Serbia s economy is primarily reliant on goods and services that are exported to top European economies such as Germany and Italy. In 2012, though, its exports are projected to go up by 1.5 percent as opposed to previous forecasts of 3%.
On a year-on-year basis Serbia s economy will grow by 0.7% in the third quarter of the 2012 fiscal but in the second quarter this growth has been estimated at 2.4 percent.
The Fiscal Council of Serbia is responsible for administering the levels of compliance of the national government with its own financial regulations. It had stated on 10th November that in 2012 fiscal the Gross Domestic Product will increase by 1.5%.
The 2012 budget does not include any increase in taxes. Similarly there will be no additions to present levels of pensions and salaries.
Allen has also said that economic growth for the first quarter of 2012 could be slower than expected due to inflation.
In 2012 fiscal the current account deficit of Serbia will increase to 8.5% of the GDP, which represents an increase of one percentage point from 2011.
Public expenses for 2012 fiscal will be reduced by 0.75 percent of the Gross Domestic Product.
Public procurements and consumption will be reduced in the upcoming fiscal as well.
The government expects to earn added profits from EPS, and taxes and bankruptcy charges, and revenues from dividends.
Financial assistance will be provided to the economic sector in 2012 fiscal. The economic policy will primarily focus on drawing greater foreign direct investment and bettering the overall business environment in Serbia.
The European Investment Bank will provide Serbia a loan of 250 million euros. This sum will be used for meeting various budgetary expenses.
Income taxes, which were earlier an important part of the national budget, will be now handled by the regional authorities.
The National Bank of Serbia estimates that in 2012 fiscal the inflation rate will be limited between 4.5 and 6 percent.
Expectations from Serbia Budget 2012:
The IMF expects that in 2012 the economy of this Balkan country will grow by 2 percent. Mark Allen has justified this by saying that this is primarily due to the present global economic condition. He has said economic growth will be minimal in the European Union in the upcoming fiscal and Italy could actually experience less economic growth in the same period and all these factors could affect the economic growth of Serbia.
At present, the public debt to GDP ratio of Serbia is approximately 45 percent. The first step that can be taken to address this problem is to aim for lesser deficit in 2012. Economic experts are predicting that if the ratio gets any higher the government might have to create a plan to reduce expenses for the medium-term.
Allen has further stated that Serbia should take it easy when it comes to borrowing money from the global market, as it already has enough financial resources of its own. He reasons that Serbia could face a situation of lesser economic growth due to stricter monetary and financial policies or reduction of capital flow owing to the present debt crisis in Europe.
The Prime Minister of Serbia, Mirko Cevtkovic, has revealed that the way the 2012 budget has been created there might not be any need to increase the Value Added Tax rates in 2012. He has further stated that the public debt could go over the 45 percent mark due to less than expected economic growth.
Cevtkovic has said that even though an increase in VAT rates will be good for the budget, it has been ruled out as any addition in tax rates can have a negative effect on the population.
Serbia is one of the few countries that are facing economic crises but are yet to increase the rates of the value added taxes. Cevtkovic has stated that it will be the last resort for the government.
As of now, inflation in Serbia is at a manageable rate but it is dependent on a couple of factors, and this is being viewed as a problem:
Performance of the agricultural sector
Amount of increase in prices of electricity, staple foods and gas utilities