Serbia

Serbia had years of conflict in the 1990s, with little or no coherent economic policies. Reform and stabilisation from 2001 involved elements of exchange rate stabilisation and very high euroisation, together with gradual developments towards indirect monetary instruments and eventually inflation targeting (unusual with such high use of foreign currency).

Years Targets and attainment Classification
1993-2000 [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 2011-12; expected inflation within band most of 2011 but above band from late 2011 loose converging inflation targeting LCIT
2013-17 formal wide continuous targets for (volatile) headline inflation missed 2013, near-missed 2014-16, met 2017; inflation expectations above band from 2013 to mid-2014; wide interest rate corridor, transmission from policy rate to money market rates remains weak; very gradual decline in euroisation; IMF urges more flexibility of exchange rate loose inflation targeting LIT

Selected IMF references: First Review under SBA September 2001 pp4-8, 11-13; SISA 2002 pp4, 14-21; SR 2002 pp5-8, 16-19; SISA 2005 pp67-75; SR 2005 pp9-10, 13-14, 16-17; SI 2006 pp42-6; SR 2006 pp19-21; SR 2008 pp7-8; SR 2010 p13; SI 2013 pp122-30; SR 2013 pp11-12, 29; SR 2015 p31; SR 2017 pp17-19, 34, 80-3; SR 2019 pp15-17. Other references: National Bank of Serbia website for Inflation Reports and data.

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