UPDATE 2-Serb parliament adopts 2013 budget, sees deficit at 3.3 pct

Sat Dec 1, 2012 6:32am EST

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* Budget pledges to cut deficit to 3.3 pct of GDP

* Govt sees 2013 growth of 2 pct, from 2 pct contraction in 2012

BELGRADE Dec 1 (Reuters) - Lawmakers in Serbia adopted a 2013 budget on Saturday, pledging to slash the deficit to 3.3 percent of national output and return the economy to growth of 2 percent as the government seeks new IMF funding.

The Balkan country is running a budget shortfall this year of around 6.2 percent of gross domestic product (GDP) as seen in the revised budget, while public debt has ballooned to 60 percent. GDP is forecast to contract 2 percent in 2012.

"The modest growth in 2013 is expected on the basis of the (expected) recovery of the (domestic) economy and of economies which are Serbia's main foreign trade partners," the budget document said.

Like much of the western Balkans, Serbia has slid back into recession this year on declining trade and investment from the crisis-hit euro zone and a harvest hit by drought. The country expects public debt to peak in 2013 at 65.2 percent of GDP.

The government set the 2013 consolidated deficit target, which includes financial statements of local communities and state funds, slightly higher, at 3.6 percent. It also set revenues at 956.4 billion dinars ($11.12 billion) and spending at 1,078 billion dinars.

"This is the beginning of our struggle against the economic crisis," Finance Minister Mladjan Dinkic said before the budget was approved by parliament by 138 votes to 69.

The government, a coalition of nationalists and socialists, is trying to secure a three-year precautionary loan from the International Monetary Fund (IMF), which froze a 1 billion euro ($1.30 billion) standby deal in January due to over-spending.

The IMF says Serbia's forecasts are over-optimistic, and the World Bank is predicting more modest growth next year. Serbia's Fiscal Council, a parliament-appointed watchdog, also warned the shortfall would be higher, about 4.3 percent.

Unemployment has reached 25.5 percent, and year-on-year inflation in October stood at 12.9 percent.

The government has outlined cuts in public sector spending, subsidies and sovereign guarantees for Serbia's major state-run companies.

The country will also resort to borrowing next year, when it plans a $2 billion Eurobond and a 500 million euro loan from the Luxembourg-based European Investment Bank for investment in small and medium-sized enterprises. It has also sought sovereign loans from Russia and China.

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