Serbia is in a recession, because its GDP fell by 1.3 per cent in the first quarter and continued its decline by 0.6 per cent in the second quarter, Serbian Finance Minister Mladjan Dinkic told a press briefing in Belgrade on Wednesday, announcing a fiscal consolidation, including an increase of the VAT rate from the present 18 per cent most likely to 20 per cent.
Dinkic said that the budget deficit exceeded 5 per cent and was planned at 4.25 per cent. Serbia's public debt five years ago was approximately 30 per cent of GDP, and today it is about 55 per cent according to the methodology used by the Serbian National Bank (NBS) and 53.5 per cent according to the methodology used by the Ministry of Finance, he was quoted by media as saying.
Dinkic said that Serbia needed about 3.4 billion euros to repay its debt due this year and about 3.6 billion next year.
The rating agency Standard & Poor's on Tuesday lowered the long-term credit rating for Serbia from BB to BB- and changed the rating outlook from stable to negative. The rating was downgraded partly because of the government's decision to increase its control of the central bank.
Three members of the NBS Council of Governors resigned on Tuesday claiming that the bank's independence was in danger. The National Assembly on Monday appointed ruling party official Jorgovanka Tabakovic as NBS Governor.
