"Inflation within target limits, GDP growth 1 percent"

"Inflation within target limits, GDP growth 1 percent"

The GDP growth will total around 1 per cent by the end of the year, Tabaković said at a news conference during which the Inflation Report for May 2014 was presented.

In the short-term period, negative effects will come from the announced fiscal consolidation and structural reforms which are necessary for a sustainable economic growth and this is one of the reasons why the economic growth will be somewhat lower, she said.

The governor expressed the belief that the talks between the Serbian government and the IMF would begin in late May, noting that Serbia does not need a new arrangement for strengthening of its foreign currency reserves, but it needs a precautionary arrangement as a mode of support to the announced structural reforms and strengthening of the foreign investors' trust in Serbia.

Commenting on the announced subsidized loans worth EUR 1.2 billion, Tabaković said that the funds should not be used for payment of overdue debts and should instead be invested in small and mid-size companies.

She stated that the arrangement with IMF would help Serbia adjust to changes in the international environment more easily and with minimal consequences, so that it could be more resistant to potential external shocks.

Foreign investments totaled around EUR 200 million since the beginning of the year and the start of the South Stream pipeline construction through Serbia, which will also be a major foreign investment, unfortunately does not depend solely on Serbia, the NBS governor said.

Tabaković noted that the consolidated budget deficit totaled 7.7 per cent of the GDP in the first quarter of the year and of this sum, more than 4 per cent of the GDP is based on loan interests.