Structural reforms are crucial to restart Serbia’s economy, which is certain to contract this year thanks to the devastating floods that hit in May, the country’s finance minister told Emerging Markets.
“Serbia has raised enough financing to cover the damages and economic losses
of the floods,” said Dušan Vujovi, who was minister of economy from April this year until July, when he became finance minster.
“The priority is to restore fiscal stability and address some of the structural problems of the past that have been pushed aside and delayed over the last couple of years.”
May’s floods killed nearly 80 people in Serbia and Bosnia, slamming coal generation in the process.
The World Bank had expect-ed Serbia to follow last year’s 2.5% GDP growth with a modest expansion. But after the floods, the forecast slipped to -0.7% for the country in 2014.
Serbia and the World Bank signed a $300m emergency loan on Thursday to help farmers recover losses, restore damaged flood control infrastructure and help avoid power blackouts during the winter. The loan was part of $1.5bn of financing from international institutions to help the recovery effort.
According to Vujovi, the loan will help “optimally import electricity to secure the lowest cost supply of power”.
Serbia is importing electricity to keep hydraulic generation levels at maximum levels in preparation for winter, when importing electricity is more expensive, he added.