Serbia’s export-led economic recovery has gained momentum, but increased inflation and foreign financing are main risks for macroeconomic stability, International Monetary Fund (IMF) stated Saturday in a report on the Sixth Review Under the Stand-By Arrangement with Serbia.

In its newest report the IMF published on its website, it was stressed that, compared with most surrounding peers, Serbia is recovering at a slow but steady pace. However, inflation has surged in recent months, and foreign financing risks remain elevated as the external trade deficit is still large, and capital inflows have become much less exuberant than before the crisis.

Inflation has picked up, resurfacing as a key policy concern. Inflation was consistently below the NBS’ tolerance band during the first half of 2010, but has recently exceeded the band. This reflects mainly food price shocks and depreciation pass-through effects, despite slow nominal wage costs growth and a still-significant output gap.

Determined efforts will be needed to achieve the 2011 budget targets. The targeted deficit of about 4 percent of GDP is in line with the new fiscal balance rule, the report reads.