Serb Government Adopts 2020 Draft Budget as IMF Warns on Wages

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Serbia’s government adopted a draft 2020 budget, aiming for an overall fiscal deficit of 0.3% of economic output to honor its agreement with the International Monetary Fund.

The spending plan projects annual economic growth of 4% next year, the Finance Ministry said in a statement. The document follows last month’s revision of the 2019 budget that introduced higher public wages and pensions, increased military and security spending and capital investments. It will now go to parliament for approval.

The government’s intention was to equally divide fiscal space and increase living standards, support growth through investments and gradually relax labor taxes, according to the statement. “This draft budget represents an end to the process of consolidation of public finances and marks the start of the development stage,” Finance Minister Sinisa Mali said in the statement.

The IMF has called on the government to carefully monitor spending so the deficit stays within agreed limits. “The overall wage bill is now growing faster than nominal GDP, for a second year in a row, which deviates from the authorities’ commitments in this area and our advice,” it said.

Economic growth was weaker than planned in the six months through June and gained pace in the third quarter, President Aleksandar Vucic said Friday. He disclosed the reading after the Statistics Office didn’t publish the indicator, citing difficulties in data collection.

Serbia is slated to hold general elections in March or April next year and Vucic has been eager to promote his polices as successful in building prosperity in a country where around three-quarters of workers are paid below the average salary.

To contact the reporter on this story: Gordana Filipovic in Belgrade at gfilipovic@bloomberg.net

To contact the editors responsible for this story: Andrea Dudik at adudik@bloomberg.net, Michael Winfrey, Sara Marley

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