UPDATE 1-Serb government raises 2013 budget deficit target to 4.7 percent of GDP


* Revised budget raises gap to 178 billion dinars ($2.02 billion

* Envisions cuts in administration, sales of unprofitable state-run firms

* No cuts, freeze of public sector wages, pensions (Adds quotes, details, context)

By Aleksandar Vasovic

BELGRADE, June 25 (Reuters) - Serbia's government adopted a revised 2013 budget on Tuesday, widening the targeted fiscal gap by one percentage point to 4.7 percent of GDP due to higher spending and low revenues.

The draft, which was sent to parliament for approval, sets the budget gap at 178 billion dinars ($2 billion), up from 122 billion dinars or 3.6 percent of GDP, the government said in a statement.

The revised budget also envisages savings plans that should secure 36 billion dinars through cuts in administrative costs and the sale of 179 unprofitable state-run firms that annually account for 750 million euros ($982 million) of budget spending.

The International Monetary Fund last month warned Belgrade the deficit could balloon to 8 percent of gross domestic product (GDP) this year with urgent action. The gap reached around six percent in the first quarter.

The lender last year suspended a previous 1 billion euro ($1.3 billion) loan deal with Serbia over rising spending and debt.

It decided last month not to negotiate a new precautionary loan deal with the European Union candidate country, which Belgrade sought as a stamp of approval to reassure investors.

Ignoring warnings from the IMF and the World Bank, the Socialist-nationalist government has decided against freezing or cutting public sector wages and pensions, which account for around half of state spending.

Instead, it agreed on a 0.5 percent increase from October.

Abbas Ameli-Renani, an emerging markets analyst with RBS said that the revised deficit target was too optimistic and that it may reach about five or six percent of GDP by year's end.

"It is more likely than not that all austerity measures will not be implemented and hopes for enhanced revenue collection will not be fulfilled," Ameli-Renani said.

Serbia raised 1.9 billion dinars ($22 million), or less than one fifth of the 10 billion dinars offered, at an auction of three-year debt on Tuesday, ahead of the government's budget announcement.

Domestic sales of Serbian treasury bills, both in dinars and euros, have underperformed since late May due to greater volatility in global markets and investors' concerns over the IMF'S budget concerns.

"In the absence of unlimited liquidity provision by the US Fed, investors will be increasingly wary of lending to a sovereign with such a large budget and current account deficit," Ameli-Renani said.

"I wouldn't be surprised if we see a continued increase in Serbian yields for the time being, both on the hard-currency as well as the local-currency debt," he said.

On the positive side, finance Minister Mladjan Dinkic said last week Serbia could have a higher than expected growth of up to 3 percent in 2013, on exports from its joint venture with Italian automaker Fiat and agriculture.

It previously expected growth of 2 percent of GDP, bouncing back from a 1.7 percent recession in 2012.

Serbia hopes the European Union will this week grant it the date for opening accession talks with the bloc, following its agreement to normalise ties with its former province of Kosovo in April. ($1 = 0.7637 euros) (Reporting by Aleksandar Vasovic; Editing by John Stonestreet, Ron Askew)



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