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The Government of the Republic of Serbia

In the service of citizens

Memorandum of budget aims to continue firm monetary policy

Belgrade, 2 November 2006

Serbian Minister of Economy Predrag Bubalo said that at its session today the government discussed 46 points on the agenda, the most important being the adoption of the memorandum of budget and economic policy for 2007, with projections for 2008 and 2009.

Predrag Bubalo

At a press conference following the session Bubalo stressed that a national economic development strategy has also been completed and will be adopted within 15 days.

He outlined that both the memorandum and the national strategy are in line with each other in all macroeconomic factors, especially in GDP growth since the government started from parameters realised during this government's mandate, which are GDP growth of 9.2% in 2004, 6.5% in 2005 and around 7% for this year.

According to Bubalo, in the last three years there was an increase in GDP of around 7% and the national strategy envisages that in the following six years Serbia should achieve GDP growth of at least 7% in order to join the developed world.

The Minister specified that in this sense, the memorandum envisages a 2007 and 2008 GDP increase of 7% and an increase of 7.5% in 2009.

When it comes to inflation, it stands at 5.6% for the first ten months this year and it is expected that it will reach 7% by year's end. Therefore the memorandum for 2007 envisages an inflation rate of 7.5%, for 2008 of 6.5% and for 2009 of 4.5%, said Bubalo.

He also said that the main aim of the 2007 memorandum, as well as of projections for 2008 and 2009, is EU association, as well as the continuation of a firm economic policy which does not envisage a surplus as high as in 2005 and 2006, but one that should be between 0.1% and 1% of GDP.

The surplus should not be a goal unto itself which is why we plan to make it more moderate because our aim is a more balanced budget, stated Bubalo.

Furthermore, our aim is to keep up the mid-term sustainable growth rate, as well as an accelerating implementation of reforms in economy and in entire society. Here we primarily mean to conclude privatisation of the social sector in the course of 2007 and continue with it in the public sector.

Bubalo stressed that the results achieved in 2006 will hardly be repeated again when it comes to foreign direct investment, deflation, GDP growth and export increase.

Speaking about major current problems in Serbia, he named a high foreign trade deficit and the high unemployment rate.

Velimir Ilic

Serbian Minister of Capital Investment Velimir Ilic said that four bidders applied for the tender for granting concessions for the Horgos-Pozega highway and added that the first-ranked was Spanish FCC in cooperation with Austrian Alpina.

He stated that the second-ranked was Serbian consortium PORR, followed by Strabagand Buig as third and Vinci and GNP as fourth-ranked.

He added that a government commission comprising assistant ministers of capital investment, finance and international economic relations, as well as financial advisors, will start negotiations with the first-ranked bidder on provisions of the concession contract.

Zoran Stojkovic

Ilic said that if agreement is reached on time the works will start in spring next year.

According to Ilic, the concession is worth nearly €800 million under the pre-concession agreement, whereas FCC’s suggestion is €1.3 billion with interest and VAT as well as short deadlines for construction within the tender.

Ilic said that the subject of concession includes the 106 kilometre long left lane of the Horgos-Novi Sad highway, maintenance of 68 kilometres of the Novi Sad-Belgrade section and planning the 148 kilometre long highway section from Belgrade to Pozega.

Serbian Minister of Justice Zoran Stojkovic said that after two months of negotiations with Italy, Major Emir Sisic was transferred to Serbia today to serve his sentence in Sremska Mitrovica.