Serbia

Years

Targets and attainment

Classification

1992-2000

[No IMF reports, no data, classification tentative]

initially Serbia was dominant element of Federal Republic of Yugoslavia, and of its 2003 successor the State Union of Serbia and Montenegro, both including Montenegro, but latter formally euroised end-2000 and became independent in 2006; currency in Serbia initially old Yugoslav dinar, which had been experiencing high inflation for many years and underwent hyperinflation in early 1990s, with currency conversions 1992, 1993 and (twice) 1994; exchange rate floating; high inflation again in late 1990s; conflicts in first half of 1990s and Kosovo war 1998, with multiple adverse effects; little structural change to economy from socialist policies of 1980s; formal fiscal deficits kept low by unsustainable means including drastic expenditure cuts, non-servicing of external debt, build-up of non-debt arrears and quasi-fiscal lending (mainly to agriculture and energy) by central bank

unstructured discretion UD

2001-08

from late 2000 stabilisation, reconstruction and reform under new government, with international isolation ended, managed float of unified exchange rate, end of quasi-fiscal lending, fiscal tightening, limits on central bank borrowing by government and wider structural reform; restructuring of monetary instruments: 2000 resumed issue of central bank bills, 2002 reform of reserve requirements and new central bank lending facilities; remonetisation from low base, continuing euroisation; bank restructuring including closure of four large state-owned banks; 2003 on political tensions following assassination of prime minister hinder reforms; alternating concerns of monetary policy with inflation and external deficit make for swings in exchange rate policy which undermine credibility and encourage euroisation (which reaches 70% for loans and deposits); by 2006 central bank using repos as instrument but pass-through to other interest rates weak and no real interest rate corridor; early 2006 shift towards more exchange rate flexibility, with view to gradual transition to inflation targeting; adverse effects from GFC 2008

loosely structured discretion LSD

2009-12

formal wide converging continuous targets for headline inflation met 2009-10, missed 2011 and most of 2012; expected inflation within band most of 2011 but above band from late 2011

loose converging inflation targeting LCIT

2013-23

formal wide continuous targets for (volatile) headline inflation missed 2013, near-missed 2014-16, met 2017-20, near-missed 2021 but well missed 2022-3; short-term inflation expectations above band from 2013 to mid-2014, above band 2022-3, but longer-term expectations largely contained; wide interest rate corridor, weak transmission from policy rate to money market rates; very gradual decline in euroisation; exchange rate stabilised, IMF argues for more flexibility; strong policy response limits downturn from Covid-19, and leads to quick recovery; 2022 commodity price rises and Ukraine war; statistical database broadly adequate by end of period

loose inflation targeting LIT