The Memorandum on the Budget and Economic Fiscal Politics for 2009, with projections for 2010 and 2011, May 2008

On the basis of Article 14, par. 1, item 1 of the Budget System Law (‘Official Gazette of the Republic of Serbia’, no. 9/02, 87/02, 61/05 – the Law, 66/05, 101/05 – the Law, 62/06 – the Law and 85/06) and Article 17, par.1 of the Law on the Government Article 17. Paragraph 1 Government Law (‘Official Gazette of the Republic of Serbia’ no. 55/05, 71/05 – corrigendum and 101/07)

The Government adopts

THE MEMORANDUM

ON THE BUDGET AND ECONOMIC FISCAL POLITICS FOR 2009, WITH PROJECTIONS FOR 2010 AND 2011

I. THE MACROECONOMIC FRAMEWORK FOR THE PERIOD BETWEEN 2009 AND 2011

Macroeconomic Trends In The Period 2005 – 2007*

Introduction. Over the period of 2005 trough 2007 Republic of Serbia saw dynamic economic growth, along with high increase of export, substantial inflow of foreign direct investments, improvement of the economic efficiency, the growth of the financial sector, high growth in net foreign assets. Positive macroeconomic results were followed by a high level inflation, as well as of foreign trade deficit and the current account deficit, the growth of salaries above the growth in productivity, growth and a large scope of public consumption and the high level of unemployment.

Major achievements over the period 2005 – 2007 were the growth of the Gross Domestic Product (GDP) – at annual average rate of 6.5% in real terms and the decrease of the unemployment rate from 21.6% in 2006 to 18.8% in 2007. Additionally, this period saw a significant net inflow of foreign direct investments in the amount of 6.2 billion EUR, the increase in foreign currency reserves to a level of 10.9 billion EUR at 2007 year end and the increase in the domestic private foreign currency savings which, at the end of 2007, were worth 4.9 billion EUR.

The results in the area of economy achieved in the period between 2005 and 2007 were accompanied by escalation of internal and external imbalances. In 2007 the inflation rate was 10.1%, whereas the trade deficit reached 21.5% of GDP, and the adjusted current account deficit 13.7% of GDP.

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On the basis of Article 14, par. 1, item 1 of the Budget System Law (‘Official Gazette of the Republic of Serbia’, no. 9/02, 87/02, 61/05 – the Law, 66/05, 101/05 – the Law, 62/06 – the Law and 85/06) and Article 17, par.1 of the Law on the Government Article 17. Paragraph 1 Government Law (‘Official Gazette of the Republic of Serbia’ no. 55/05, 71/05 – corrigendum and 101/07)

The Government adopts

THE MEMORANDUM

ON THE BUDGET AND ECONOMIC FISCAL POLITICS FOR 2009, WITH PROJECTIONS FOR 2010 AND 2011

I. THE MACROECONOMIC FRAMEWORK FOR THE PERIOD BETWEEN 2009 AND 2011

Macroeconomic Trends In The Period 2005 – 2007*

Introduction. Over the period of 2005 trough 2007 Republic of Serbia saw dynamic economic growth, along with high increase of export, substantial inflow of foreign direct investments, improvement of the economic efficiency, the growth of the financial sector, high growth in net foreign assets. Positive macroeconomic results were followed by a high level inflation, as well as of foreign trade deficit and the current account deficit, the growth of salaries above the growth in productivity, growth and a large scope of public consumption and the high level of unemployment.

Major achievements over the period 2005 – 2007 were the growth of the Gross Domestic Product (GDP) – at annual average rate of 6.5% in real terms and the decrease of the unemployment rate from 21.6% in 2006 to 18.8% in 2007. Additionally, this period saw a significant net inflow of foreign direct investments in the amount of 6.2 billion EUR, the increase in foreign currency reserves to a level of 10.9 billion EUR at 2007 year end and the increase in the domestic private foreign currency savings which, at the end of 2007, were worth 4.9 billion EUR.

The results in the area of economy achieved in the period between 2005 and 2007 were accompanied by escalation of internal and external imbalances. In 2007 the inflation rate was 10.1%, whereas the trade deficit reached 21.5% of GDP, and the adjusted current account deficit 13.7% of GDP.

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