Serbian Cabinet Approves ’09 Budget With Deficit at 1.5% of GDP

By Aleksandra Nenadovic

Dec. 6 (Bloomberg) -- The Serbian government adopted a draft 2009 budget that projects a deficit equivalent to 1.5 percent of gross domestic product, in line with recommendations from the International Monetary Fund and narrower than this year.

“The government has adopted a budget that makes no one happy,” Finance MinisterDiana Dragutinovic said at the press conference in Belgrade today. “This is a restrictive budget, and the government has acted responsibly.”

GDP growth is forecast at 3.5 percent, about half the pace of 2008. Inflation is projected at 8 percent, or 1.5 percentage points less than this year. The budget deficit this year is predicted to be 2.7 percent of GDP.

The cabinet’s approval came after a month-long delay, as the parties in Mirko Cvetkovic coalition government argued over distribution of cuts through ministries.

Parliament is scheduled to debate the proposed budget in the coming week.

The draft budget projects the current account deficit at 16.3 percent of GDP in 2009, 2.2 percentage points less than in 2008. State revenue is projected at 698.7 billion dinars ($10.2 billion) and expenditure at 748.3 billion dinars.

Serbia secured a $516 million standby loan on Nov. 14 from the International Monetary Fund, the fourth eastern European nation to tap the institution for funds, to help stabilize the economy during the global financial crisis.

The IMF warned that government overspending may push the current-account deficit in 2008 above 18 percent of GDP, which it must cover through increased borrowing.

To contact the reporter on this story: Aleksandra Nenadovic in Belgrade at anenadovic@bloomberg.net.