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The Government of the Republic of Serbia

In the service of citizens

New measures to secure €1.3bn for economy

Belgrade, 1 March 2010

Serbian Prime Minister Mirko Cvetkovic said that around €1.3 billion will soon be made available to the Serbian economy through favourable loans, thanks to new measures prepared jointly by the government and the National Bank of Serbia.

In an interview for yesterday’s edition of the Vecernje Novosti daily, Cvetkovic said he expects this year’s economic growth to increase by 2%.

According to recently released statistical data about industrial production in January, industrial output has risen, unlike in 2009 when it fell drastically. The rise is a symbolical 3.7%, but it nevertheless signals a change in the structure of the economy, which is encouraging, Cvetkovic said.

The Prime Minister stressed that this is a completely new set of economic monetary measures which will help the economy to function better this year.

Specifically, bearing in mind that the demand for goods and services has fallen, we need to secure additional funds for the economy. This is why we have worked intensively with the National Bank of Serbia for the past month on a project implying a reduction of mandatory reserves for business banks willing to secure larger funds to the economy, Cvetkovic explained.

On the other hand, this year the government once again adopted a programme of subsidies for citizens and the economy, he added.

The funds will be available to business banks for programmes for the economy. This is a package that should discourage banks from using these funds for other purposes, Cvetkovic said, adding that the IMF Mission agreed with this measure during their last visit to Serbia.

The Prime Minister highlighted that citizens’ trust in the Serbian currency will increase when inflation falls from 6% to 2%.

The weakening of the dinar was felt most by citizens who took loans in Euros, but receive their salaries in dinars, and accordingly their purchasing power has been reduced. As for those who are not indebted to banks, their purchasing power does not depend on the exchange rate, but on the fluctuation of prices, Cvetkovic said.

He said that the decision on linking state subsidies with the Euro should be reconsidered and attention turned instead to business bank packages for loans in dinars.

As for the annulment of the tender for the north branch of Corridor 10, Cvetkovic stressed that this will not affect the beginning of work on this scheme.

In line with the law, the three top-ranked bidders will be invited to amend their project documentation and I believe that we will find a contractor and that the works will begin at the onset of the construction season, the Prime Minister said.

Cvetkovic announced that salaries in the public sector may go up in the second half of the year, if economic growth achieves a significant increase.

He said that in the next few years pension expenses will amount to around 10% of GDP, as agreed with the IMF.

The Prime Minister explained that the government chose to synchronise pensions with the increase of salaries in the public sector in the next 18 months, because it is estimated that this period is long enough to mitigate the consequences of the 24 month long period of frozen pensions.

Cvetkovic also said he believes that in 2010 the privatisation of Jat Airways will be completed, adding that the government is negotiating with airline companies and investors who have a clear investment plan in this company.