Economy "heading for recession in July"

Economy "heading for recession in July"

BELGRADE -- Recent floods will have a negative impact on the economic activities in the country, and Serbia is expected to move into recession early in July.

At the same time, inflation will not remain within the target band due to expected increase in prices of foods and services, Saša Đogović, associate of the Belgrade Institute for Market Research (IZIT), stated on Thursday.

“A sharp downturn is expected in May, while in July at the end of the second quarter the recession will be certain,” Đogović said, commenting on the effects of catastrophic floods which are to be analyzed.

Đogović told a news briefing that inflation will stand at least at five percent at the end of the second quarter of this year with a tendency of further increase, and therefore it will not remain within the target band of four plus/minus 1.5 percent, though the price increase will not pose a problem to the macroeconomic stability in the country.

Recent floods will have a negative effect on the industrial and agricultural production and thereby result in a GDP drop, he said.

Therefore, the government needs to take urgent measures including a new standby arrangement with the IMF in September, which should call for support for restructuring of debts to the Fund and other international financial institution in order to prevent the country's bankruptcy, Đogović said.

Serbia's problem by the end of the year will be the increase of the budget deficit and public debt, Đogović said, adding that therefore the cooperation with the IMF is important so that the debts could be settled.

Commenting on the government's reform measures, Đogović said that the...