1. Republic of Serbia Draft 2007 Budget Law June 2007 www.mfin.sr.gov.yu

2. Republic of Serbia budget: present situation and objectives Present situation Real macroeconomic trends and projection till the end of 2007 Execution of the Republic budget in January – May 2007 Planned fiscal policy in the second half of 2007 Objectives Macroeconomic stability Dynamic economic growth Higher employment levels and standard of living

3. Macroeconomic projections for 2007 Gross Domestic Product, bln RSD 2,381.70 Real GDP growth, in % 5.9 Exports growth in USD, in % 26.8 Imports growth in USD, in % 23.7 Current account deficit, as % of GDP -11.4 Real investment growth, in % 21.5 Inflation, end of the year, in % 6.5 Employment, in % 1 Real average net income growth, in % 13.6 Labor productivity growth, in % 5

4. Fiscal policy in the second half of 2007 - tax reforms - Reducing transfer tax rate from 5% to 2.5% Transfer tax exemption for acquisition of first apartment VAT refund for a person acquiring his/her first apartment Reducing VAT rate for computers from 18% to 8% Increasing VAT registration threshold from 2 to 4 million dinars Revoking excise duties for imported soft drinks and fruit juices Reducing excise duty for coffee Changing excise and customs duties for tobacco products, in line with the Action Plan Introducing excise duty for autogas

5. Fiscal policy in the second half of 2007 - public expenditure - Projects agreed within the National Investment Plan Constitutionally guaranteed transfers to other level of government and mandatory social insurance organizations Agreed pay rise percentages – education, health, culture

6. Public revenues and expenditure in 2007

7. Republic of Serbia budget in 2006 and 2007 (mln RSD)

8. Repayment of public debt (mln RSD)

9. Comparative overview of realized deficit – surplus in consolidated state sector (as % of GDP)