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Serbia to implement €5bn stimulus package to support economy

By bne IntelliNews March 30, 2020

2-3 minutes

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Serbia's government will implement a set of measures worth €5bn to help the economy tackle the negative consequences from the coronavirus (COVID-19) outbreak, President Aleksandar Vucic said as quoted by eKapija on March 30. The details of this plan should be revealed on March 31.

Serbia adopted tough restrictions after declaring a state of emergency in the middle of March following the coronavirus outbreak. As the country started mass testing, the number of confirmed cases is increasing sharply and as of the end of March 29 it reached almost 800 people.

The measures the government will implement will be partially funded by international institutions. On March 30, Raiffeisen Research noted that the IMF has advised Serbia to consider converting the current non-financial IPC instrument into a stand-by arrangement in case IMF money is needed to address the impact of the coronavirus on the domestic economy.

If the government decides to change its agreement with the IMF, it could get around €400mn in cheap loans from the IMF.

The country has a strong liquidity buffer as public sector deposits with the central bank stood at €3.2bn as of February, as well as €13.4bn in FX reserves and cumulative budget surplus of the last three years. In April, the government is expected to sell securities in order to refinance older debt.

"Although local banks are expected to bid in the auction, especially as NSB's liquidity injection last week should have eased earlier funding constraints, the demand is likely to remain below the government expectation," Raiffeisen Research noted.

Earlier in March, Vucic projected that Serbia's economy will contract 2% in 2020 due to the coronavirus outbreak.