Serbia’s long-awaited new deal with the IMF should bolster investor confidence in the country but the substantial fiscal tightening that the Fund has prescribed will prove politically difficult to implement.
On November 20, the Fund announced a new 36-month standby agreement for Serbia worth around €1bn, with the package expected to be in place from January 1, pending final approval. The deal foresees Serbia reducing its budget deficit from 8 per cent of GDP in 2014 to between 4 and 4.25 per cent by 2016. Dusan Vujovic, Serbia’s finance minister, said this would require savings of around €1.3bn to €1.4bn. Read more
Short of expectations for now but holding out hope for the future. That seems to be the best that can be said of Croatia’s first offshore oil and gas exploration tender, which closed for bidding this month.
Full results of the auctions, including the identity of the bidders, have yet to be made public, although the organisers said 15 of the 29 blocks on offer received bids. One person involved told beyondbrics they came from three bidders: INA, Croatia’s own national oil company; a consortium formed by OMV of Austria and Marathon Oil Corporation of the US; and a consortium of Eni of Italy, MedOil of the UK and a third unidentified company. Read more
Romania is set for a period of political uncertainty following the shock victory of liberal Klaus Iohannis (pictured) in a presidential election on Sunday. With 96 per cent of the votes counted, Iohannis was in the lead with nearly 55 per cent, an unexpected triumph over Prime Minister Victor Ponta of the ruling Social Democrats (PSD).
Ponta will now face calls to stand down from the premiership, even though he has said he is determined to stay on as Romania prepares to draw up its 2015 budget, paying for a pre-election splurge. Read more
Boyko Borisov: he's back
It is a minority administration involving a coalition within a coalition, backed by another coalition and a splinter party. But at least Bulgaria has a government, and a government with an agenda for reform. It has a hefty in-tray including energy sector restructuring, mopping up after a banking crisis, and getting a beleaguered economy moving again. Read more
Serbia has received more than 1,700 letters of intent from potential investors for the 502 enterprises that it is lining up for privatisation, Zeljko Sertic, economy minister, has told beyondbrics in an interview.
Sertic said the government was seeking investors to develop Belgrade’s Nikola Tesla Airport and emphasised the government’s appetite for reform to boost the private sector, which some investors have started to question.
With talks with the International Monetary Fund starting this week, Sertic was keen to emphasise that Serbia had embarked on privatisation and fiscal tightening without external pressure. Read more
The last time an Albanian prime minister visited Belgrade, the Iron Curtain was just descending across Europe, rock and roll had yet to be invented and Pelé was just six years old.
In this context, the decision of current Albanian premier Edi Rama to delay his planned trip to Serbia by a mere two and a half weeks may not seem hugely significant. But Rama’s postponement comes after a spat triggered by an episode bizarre even by Balkan standards and in the wake of subsequent attacks on Albanian property in Serbia. Read more
Bulgaria will have to conjure its fifth government in less than two years from its most fragmented parliament since the fall of Communism, after the country’s snap election on October 5.
Over the past 20 months, the EU’s poorest member state has experienced street protests against successive governments, a banking crisis, severe flooding and the loss of Brussels funding through maladministration. It has also been caught in a squeeze between its EU responsibilities and the baleful influence of long-time ally Russia, on which it has heavy energy dependence. The new government will have its hands full – once it is pieced together from the fractious groupings that made it into parliament. Read more
Romania’s latest interest rate cut – to another all-time low – comes after a sharp slowdown in growth, but further easing will have to be weighed against the political outlook and the government’s likely parting of ways with the IMF.
The National Bank of Romania (BNR) cut its key rate 25 bps to 3 per cent on September 30, while reducing its minimum reserve requirements two percentage points to 10 per cent. The latter is expected to increase market liquidity by around 3.6bn leu ($1bn) from October 24, according to a note from BCR, Romania’s largest commercial bank. Read more
Serbia’s prime minister has criticised his country’s culture of state handouts and its bloated public sector, vowing to create an economy of opportunity rather than one dominated by “charmed individuals”.
Aleksandar Vucic, a former ultra-nationalist elected in a landslide election victory in March, spoke to beyondbrics after announcing cuts in public sector salaries and pensions. Read more
Bulgaria must bolster defence spending in response to the Russian invasion of Ukraine and war in the Middle East, the country’s defence minister has told beyondbrics in exclusive comments. Velizar Shalamanov (pictured), a member of the caretaker government that will step down after elections next month, reiterated Bulgaria’s commitment to Nato at a time when some of the alliance’s members have been accused of backing away from their obligations.
However, a long-term shift towards higher defence spending and a break with Russia will be hard to implement. Read more
Will there be any end to Croatia’s economic travails? The EU’s newest member state has not seen meaningful growth since 2008 and its GDP shrank again in the second quarter, by 0.8 per cent.
It was the eleventh consecutive quarter of contraction, indicative of a deep economic funk upon which EU accession last July has made barely a dent. In need of lasting structural reform, the economy is likely to limp to the end of the year in continued recession. Read more
Negligible inflation and a desire to maintain exchange rate stability in spite of capital inflows were the key factors prompting Romania to cut interest rates to an all-time low, analysts said on Tuesday.
On August 4, the National Bank of Romania (BNR) reduced its key policy rate to 3.25 per cent from 3.50 per cent. Reuters quoted Governor Mugur Isarescu as telling reporters that more easing was possible. “There may be further (easing) space but, this time, we’d be forced to take decisions taking into account the external environment to a greater extent,” Isarescu was quoted as saying. Read more
After the deluge, the contraction. Serbia’s economy shrank by 1.1 per cent year-on-year in the second quarter after the country was hit by serious flooding that may have caused €1.7bn of damage.
May’s floods came just when the economy seemed to be picking up again and a new government was installed with a big majority and mandate for sweeping reform. The impact of the disaster has been felt across the economy and will weigh on full-year growth, now expected to be negligible. The shrinkage in the second quarter, reported in a flash GDP estimate from Serbia’s statistical office, followed a 0.1 per cent y-o-y rise in Q1. Read more
And it's goodbye from him
Bulgaria’s battered and unloved government formally resigned on July 24, its reputation shaken by its policies and alleged murky business links – and, more recently, a banking crisis. With snap elections looming in October, a caretaker government will now seek to steady the ship and repair relations with the European Union. The election is expected to usher in the nominally rightist opposition with the hope it will take a more reform-minded and western-looking approach. Read more
Bulgaria’s under-fire central bank has turned to the European Central Bank to oversee the country’s financial system days after it announced that it would allow the country’s fourth-biggest lender to collapse.
Bulgaria’s banking system as a whole remains well-capitalised. But the Bulgarian National Bank’s decision to enter talks with the ECB about joining the joining the European Single Supervisory Mechanism (SSM), even though Bulgaria is not in the eurozone, is an admission of draining confidence in the country’s financial and political authorities. Read more