Serbia plans to boost economy

Belgrade - Serbia plans to adopt measures, including subsidies for commercial corporate loans and tax relief for new job hires, to revive the economy and help reduce unemployment, the prime minister says.

Analysts immediately warned that without rigorous saving efforts, possibly including pension cuts, the proposed measures risked further inflating the Balkan country's budget deficit, now seen at 7.1% of national output.

Centre-right Prime Minister Aleksandar Vucic met heads of major commercial banks on Monday to discuss the government's plan to allocate €60m to banks to cover the cost to them of offering lower interest rates to corporate borrowers.

"We hope that in that way the banks will be able to place up to €1.2bn (in loans) to companies," said Vucic.

Unemployment

Vucic, who took power last month, will also meet foreign investors and local corporate leaders to discuss steps to reduce unemployment, currently around 20%.

Vucic has pledged root-and-branch reform of the bloated public sector, which employs nearly 800 000 people, to secure a financing deal with the International Monetary Fund.

The government is forecasting 1% economic growth this year, but analysts say the economy could stagnate as fiscal consolidation may hamper domestic demand.