Serbia's central bank raises 2021 growth forecast to 6.5%

BELGRADE, Aug 18 (Reuters) - Serbia's central bank raised the country's growth forecast for 2021 to 6.5%, up from 6% in May, on the back of a "fast recovery" from the COVID-19 pandemic.

"Timely ... monetary and fiscal policy measures minimised effects of the pandemic and influenced a fast recovery of our economy," governor Jorgovanka Tabakovic said at the presentation of the inflation report.

The International Monetary Fund expects the Balkan country's economy to rise around 6% in 2021, following a .1% contraction last year.

Last week, the central bank kept its main interest rate unchanged at 1%, citing the effects of policy measures.

In April, Serbia amended the 2021 budget to mitigate effects of the pandemic, increasing the deficit to 6.9% of GDP from 3%.

The economy of the EU membership candidate grew 1.7% in the first quarter of 2021. The Statistics Office is due to announce Q2 growth data on Aug. 31.

Serbia has seen a sharp increase in COVID-19 infections in recent weeks, driven by the spread of the Delta variant, mostly in the unvaccinated.

It has so far vaccinated over 50% of its population of around 7 million and authorised a third dose for anyone vaccinated at least six months ago.

It has recorded 734,816 coronavirus cases since the start of the pandemic, with 7,177 deaths.

Tabakovic said inflation was expected to remain within the upper half of bank's target band of between 3% and give or take 1.5 percentage points. It stood at 3.3% in July.