Serbian Prime Minister Mirko Cvetkovic stated today that the key challenges in 2010 will be to halt the fall in employment, increase domestic demand and secure macroeconomic stability, with the emphasis on inflation and the dinar exchange rate.

Opening the “Kopaonik Business Forum 2010”, Cvetkovic stressed that there is no reliable data based on which we could claim that Serbia has left the crisis behind, but there are a series of optimistic indicators signalling that we can anticipate that moment.

He said that the government policy this year will focus on increasing business activities, stabilising the domestic currency, reducing public spending and preserving social security.

We will also continue with public sector reforms, harmonisation with EU standards and combating corruption and crime, Cvetkovic added.

The Prime Minister highlighted that the increase of 3.7% in industrial output in January, larger exports in the first two months of 2010 and the 1.5% growth of the composite index in January all point to positive movements and thereby herald an increase in GDP.

However, negative signals include lower than projected budget inflow in the first two months, the continued fall in domestic demand and a 3% drop in imports in the same period, Cvetkovic noted.

Cvetkovic announced that this year public companies and the state will set aside RSD 16 billion and provide a fiscal stimulus of RSD 4 billion as support to the construction and purchase of new flats.

He said that the government will strive to stimulate export demand by supporting export deals and providing institutional support for conquering new markets.

The Prime Minister recalled that in January he spoke with Governor of the National Bank of Serbia Radovan Jelasic, who told him that €1.3 billion will be secured from banks’ obligatory reserves, adding that businessmen are not pleased with these measures.

Cvetkovic said that time will show whether these measures will suffice, adding that their effect will depend on the movements in the economy.

Speaking about macroeconomic trends, Cvetkovic noted that imports in the first two months of the year amounted to RSD 8.3 billion, or 8.5% lower than projected.

He said that if the economic growth fails to exceed 2%, this year will be similar to the previous one and people will not feel any progress, recalling that a continued annual economic growth of 5–6% is needed in order to achieve the goals and move forward.

Cvetkovic stressed that formulating an economic policy is not a problem for the government, however the resolution of conflicting interests within this model could be.

He asked businesspeople and experts in economy for help in solving these conflicts, one of them being the government’s goal to increase demand, and at the same time reduce public spending, which is the largest source of demand.

The other example of a conflicting situation is the need to improve the social position of people and raise their salaries, but at the same time maintain a restrictive budget, he explained.

The Prime Minister said that compared to other states in the region, Serbia’s results in 2009 were among the average or even slightly better, adding that the 2.8% drop in GDP is a better score than in the rest of the region, except Macedonia.

Cvetkovic stressed that Serbia’s budgetary deficit of 4.2% of GDP is at the average level in the region, adding that when it comes to public debt, Serbia is below average.

He stressed that the unemployment rate is high, which is one of Serbia’s major problems, adding however that average salary is not the lowest in the region.

Last year salaries in Serbia were 0.2% higher than in 2008 and pensions increased by 3.3%, which means that citizens’ purchasing power was not reduced, Cvetkovic concluded.