"Serbia is in recession, VAT rate to be increased"

BELGRADE Serbian Minister of Finance and Economy Mladjan Dinkic stated on Wednesday in Belgrade that Serbia was "in recession". The data showed that the GDP drop in the first quarter amounted to 1.3 percent, and 0.6 percent in the second, he explained. "Serbia is in recession, VAT rate to be increased" Dinkic said these were preliminary figures, but added that the precise figures "can only be worse". The economic situation is additionally aggravated by the drought, Dinkic said, and announced measures such as a cut in procurement of fertilizers, seeds and fuel. Speaking about the budget, Dinkic said that the deficit of the consolidated account amounts over seven percent of the GDP, while the deficit of the Republic of Serbia surpasses five percent of the GDP, and noted that the planned deficit was 4.25 percent. Dinkic noted that when he took over the economy sector-related ministerial duties in the government of Mirko Cvetkovic, the budget surplus stood at EUR 1.1 billion, and today deficit amounts to EUR 2.2 billion. Today, the budget deficit amounts to RSD 225 billion, and together with obligations, which have not been registered in the budget, such as RSD 8 billion for Fiat and about one billion for expropriation of land at Corridor 11, the deficit amounts to RSD 235 billion, Dinkic said. Serbia's public debt amounted around 30 percent of the GDP five years ago, and today it is about 55 percent of the GDP, according to the NBS data, and 53.5 percent according to the data of the Ministry of Finance, Dinkic stated. Dinkic said that Serbia should allocate around EUR 3.4 billion this year, and about EUR 3.6 next year, stressing that these figures have to be reduced in spite of huge needs. Dinkic also stated that preparations for the budget review and simultaneous adoption of the 2013 budget were underway, and announced a change in the value-added tax (VAT) which would increase to 20 percent. Dinkic said that competent bodies are preparing to change the VAT rate which would not exceed 20 percent, while the VAT for food products would remain at seven percent, and added that the final decision to increase VAT rate would be adopted after the budget expenses are reviewed. The year of 2012 is already lost in terms of budget deficit reduction, but the figure would be cut by around RSD 100 billion in the year to come, the finance minister told economics reporters during a briefing. Dinkic said that the preparations for the adoption of a set of measures both in term of revenues and expenditures are underway and these would include 17 laws. He noted that the bills would be filed to the Serbian parliament in September and that most of the measures would be implemented as of October. The minister noted that the effects of the measures cannot become visible in 2012, and that they can be felt at the beginning of the next year at the earliest. He pointed out that the plan is to refrain from adoption of unilateral measures for the increase of some taxes only, and to reduce expenditures. Dinkic added that around 256 para-fiscal taxes should be abolished. In this way, it would become legally impossible for anyone except the Finance Ministry to introduce any taxes, Dinkic said. Mladjan Dinkic (Beta, file) "EUR 2 billion for Serbia" Mladjan Dinkic also stated on Wednesday that the talks on granting around EUR 2 billion worth of funds to Serbia are underway, and announced that a delegation of the International Monetary Fund (IMF) should visit Serbia soon to discuss a new arrangement. We are on the path to closing a contract on solvent funds that would ensure regular payment of salaries and pensions, Dinkic said but he did not wish to specify the details except that the funds come from foreign sources. For the less part, the funds would be covered by issuing securities, Dinkic said and announced that the plan for issuing Eurobonds in 2012 remains in force. There will be no cuts in salaries and pensions which would be adjusted to the situation in the economy, and there would be no dismissals in public services while the crisis lasts, Dinkic reiterated and added that more details about this would be known after the talks with trade union representatives. During a briefing for reporters, Dinkic said that he called on the IMF to visit Serbia and added that in the earlier talks with the IMF, it became clear that the previously frozen precautionary arrangement no longer has any effect for the country, which is why a completely new arrangement would be closed with the IMF. Replying to the reporter's questions as to the Tuesday decision of the U.S. credit rating agency Standard and Poor's to lower Serbia's long-term credit rating by one percent, from BB to BB- with a negative forecast, Dinkic said that the improvement of the country's rating would depend on the fulfilment of the plan for budget deficit reduction and the success in the recovery of the economy and exit from recession. He said that the National Bank of Serbia should implement the same policy as the Finance Ministry, 'nothing more and nothing less,' with a view to preserving macroeconomic stability. Tanjug

"Serbia is in recession, VAT rate to be increased"

Dinkić said these were preliminary figures, but added that the precise figures "can only be worse".

The economic situation is additionally aggravated by the drought, Dinkić said, and announced measures such as a cut in procurement of fertilizers, seeds and fuel.

Speaking about the budget, Dinkić said that the deficit of the consolidated account amounts over seven percent of the GDP, while the deficit of the Republic of Serbia surpasses five percent of the GDP, and noted that the planned deficit was 4.25 percent.

Dinkić noted that when he took over the economy sector-related ministerial duties in the government of Mirko Cvetković, the budget surplus stood at EUR 1.1 billion, and today deficit amounts to EUR 2.2 billion.

Today, the budget deficit amounts to RSD 225 billion, and together with obligations, which have not been registered in the budget, such as RSD 8 billion for Fiat and about one billion for expropriation of land at Corridor 11, the deficit amounts to RSD 235 billion, Dinkić said.

Serbia's public debt amounted around 30 percent of the GDP five years ago, and today it is about 55 percent of the GDP, according to the NBS data, and 53.5 percent according to the data of the Ministry of Finance, Dinkić stated.

Dinkić said that Serbia should allocate around EUR 3.4 billion this year, and about EUR 3.6 next year, stressing that these figures have to be reduced in spite of huge needs.

Dinkić also stated that preparations for the budget review and simultaneous adoption of the 2013 budget were underway, and announced a change in the value-added tax (VAT) which would increase to 20 percent.

Dinkić said that competent bodies are preparing to change the VAT rate which would not exceed 20 percent, while the VAT for food products would remain at seven percent, and added that the final decision to increase VAT rate would be adopted after the budget expenses are reviewed.

The year of 2012 is already lost in terms of budget deficit reduction, but the figure would be cut by around RSD 100 billion in the year to come, the finance minister told economics reporters during a briefing.

Dinkić said that the preparations for the adoption of a set of measures both in term of revenues and expenditures are underway and these would include 17 laws. He noted that the bills would be filed to the Serbian parliament in September and that most of the measures would be implemented as of October.

The minister noted that the effects of the measures cannot become visible in 2012, and that they can be felt at the beginning of the next year at the earliest.

He pointed out that the plan is to refrain from adoption of unilateral measures for the increase of some taxes only, and to reduce expenditures. Dinkić added that around 256 para-fiscal taxes should be abolished.

In this way, it would become legally impossible for anyone except the Finance Ministry to introduce any taxes, Dinkić said.

"EUR 2 billion for Serbia"

Mlađan Dinkić also stated on Wednesday that the talks on granting around EUR 2 billion worth of funds to Serbia are underway, and announced that a delegation of the International Monetary Fund (IMF) should visit Serbia soon to discuss a new arrangement.

We are on the path to closing a contract on solvent funds that would ensure regular payment of salaries and pensions, Dinkić said but he did not wish to specify the details except that the funds come from foreign sources.

For the less part, the funds would be covered by issuing securities, Dinkić said and announced that the plan for issuing Eurobonds in 2012 remains in force.

There will be no cuts in salaries and pensions which would be adjusted to the situation in the economy, and there would be no dismissals in public services while the crisis lasts, Dinkić reiterated and added that more details about this would be known after the talks with trade union representatives.

During a briefing for reporters, Dinkić said that he called on the IMF to visit Serbia and added that in the earlier talks with the IMF, it became clear that the previously frozen precautionary arrangement no longer has any effect for the country, which is why a completely new arrangement would be closed with the IMF.

Replying to the reporter's questions as to the Tuesday decision of the U.S. credit rating agency Standard and Poor's to lower Serbia's long-term credit rating by one percent, from BB to BB- with a negative forecast, Dinkić said that the improvement of the country's rating would depend on the fulfilment of the plan for budget deficit reduction and the success in the recovery of the economy and exit from recession.

He said that the National Bank of Serbia should implement the same policy as the Finance Ministry, 'nothing more and nothing less,' with a view to preserving macroeconomic stability.