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The Government of the Republic of Serbia

In the service of citizens

Transitional Trade Agreement to increase Serbian spending capacity

Belgrade, 6 December 2008

Serbian Deputy Prime Minister and Minister of Economy and Regional Development Mladjan Dinkic today stated that the implementation of the Transitional Trade Agreement with the EU will not only increase the competitiveness and spending capacity of Serbian citizens, but also reduce inflation.

In an interview to the Blic daily Dinkic stressed that the reduction of taxes will decrease Serbia's income, but enable citizens to buy cheaper vehicles and other goods, which will increase competitiveness and spending capacity.

Dinkic said that Serbia is asking for macroeconomic assistance from the European Commission because the budget deficit is approximately €1 billion, €600 million of which has already been provided and the European Commission will be expected to set aside another €400 million.

The Minister said the problem of public spending would be solved this way, without using funds from privatisations.

As for the 2009 budget, Dinkic pointed out that the budget will be restrictive and will enable the realisation of developmental projects, such as Corridor 10 and the ring road around Belgrade, which will employ more than 50 thousand people.

According to Dinkic RSD 50 million has been provided for SMEs and more than 1,5 % of the GDP has been set aside as a guarantee for commercial banks to provide loans under favourable conditions, with a 3% interest rate.

The Minister stressed that the National Bank of Serbia is making efforts to make the RSD stronger, adding that projected inflation for 2009 will be approximately 9%.

The budget also envisages that the Development Fund will allocate RSD 21 billion for various projects which will also provide new jobs, said Dinkic, adding that Fiat's investment is still of prime importance.

Dinkic said that the funds for Greenfield investments have already been provided, adding that several German car companies have shown their interest in producing car parts in Serbia.