The government expects an economic growth of 1.5% in 2012, whereas this year Serbia will have a 2% growth. Serbia is likely to exceed the debt limit of 45% of GDP and will then have to adopt a programme in order to bring public debt down to permitted levels. The EU is more or less satisfied with the level of reforms in Serbia, but it still needed to further the reform process. The crisis in the entire eurozone has imposed the need for re-projecting the economic growth both in the eurozone and in Serbia.

“When other countries were about to obtain the candidate status, the conditions placed before them pertained only to reforms. We were told: 'You will get the candidate status if you continue the dialogue with Pristina and if you start implementing what you have agreed on.' Both of the requirements are essentially unrelated to reforms,” Cvetkovic said for Thursday's edition of Ekonom:east, a weekly magazine published by Belgrade-based Ekonom:east Media Group (EMG).

Ahead of December 9, when Serbia's candidate status for EU membership will be decided on, the prime minister said that it might be concluded that the EU was more or less satisfied with the level of reforms in Serbia, but by that he did not mean to say that Serbia had finished the job, as it still needed to further the reform process.

“In the political domain, we are faced with the problem that was caused neither by the current nor the previous government, but one that has been here for decades. Our position on this issue is quite clear. We do not want to do make any step that would explicitly or implicitly recognize the independence of Kosovo,” Cvetkovic said.

The prime minister was asked to comment on the information alleging that some Serbian citizens from Kosovo and Metohija had applied for Russian citizenship recently.

“Formally, every citizen has the right to go public with such a view, but the question is how much this helps solve the problems of Serbs in Kosovo and Metohija. The fact is that a fair solution to the problems in Kosovo and Metohija has not yet been found, and any solution that is not fair leads to instability and serious consequences,” said the Serbian prime minister.

No VAT increase in 2012

In an interview to the Ekonom:east magazine, Cvetkovic said it has been agreed to send the budget proposal to the Serbian Parliament by 15 December, stressing that because of the way in which the budget for 2012 was conceived, VAT will not have to be increased next year.

He underlined that a VAT increase would have a positive effect on the budget, but also negative ramifications for the population, adding that Serbia is one of the rare countries going though the several years long crisis period without raising this tax.

During the talks with the International Monetary Fund (IMF), the government aimed at a somewhat lower deficit than the one dictated by fiscal rules, and that is 4.5% of GDP, bearing in mind that in a certain percentage, this deficit would have an effect on the public debt which will get close to the top limit of 45% of GDP, the Prime Minister observed.

This autumn Serbia withdrew $1 billion on the basis of Eurobonds, which increased the public debt, but the funds were not spent, so the net public debt has not changed, he said.

When it comes to whether Serbia is ready for the new blow of the crisis, Cvetkovic announced some incentives that are under preparation, and added that certain subsidies for agriculture will be kept.

The government expects an economic growth of 1.5% in 2012, whereas this year Serbia will have a 2% growth, he said.

Cvetkovic said that Serbia is likely to exceed the debt limit of 45% of GDP and will then have to adopt a programme in order to bring public debt down to permitted levels.

Fortunately, much of our debt obligations are distributed over a number of years so annual installments are not enormously high to endanger the liquidity, explained the Prime Minister.

Explaining the reasons for the delay in the preparation of the 2012 budget which the government was supposed to adopt in early November, Cvetkovic said that the main reason is embodied in the IMF mission which was supposed to perform two tasks in Serbia.

The IMF mission's first task was to look into the realisation of the current budget and the recently carried out budget review, and the second one refers to reaching an agreement on the frameworks of the 2012 budget, the prime minister said and added that the crisis in the entire eurozone has imposed the need for re-projecting the economic growth both in the eurozone and in Serbia.

We have agreed that the budget would be forwarded to the Serbian parliament by December 15 and we will stick to this deadline, Cvetkovic noted.

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