Serbia’s economic policy, especially since the term of office of the pro-European government coalition that ruled from 2008 to 2012, has been shaped by an economically liberal course and the setting of the course for the corresponding transformation and modernization of economic policy and its institutions and instruments. A modern, transparent housekeeping system was introduced. The strengthening and functional reform of the tax authorities has been initiated. The tax system was reformed and a sales tax was introduced. A reform of the civil service system has been carried out, the number of employees in the public administration has been reduced and the pay system has been streamlined. The reform of the unsustainable social systems, the pension system and social assistance has started.
As part of the EU integration process, the Serbian government has adapted a large number of laws to EU standards in recent years.
The Eastern Committee of German Business offers an overview of economic policy in Serbia.
Impact of the Great Depression
According to philosophynearby, the effects of the Great Depression that reached Serbia at the end of 2008 were noticeable, but could be kept limited by economic policy measures and international support measures. In 2009 the gross domestic product lost 3%, exports collapsed by 12%, and inflation rose by 8.1%. At the end of 2008-beginning of 2009 the dinar suffered a 20% decline in value, at the same time private households withdrew 18% of their deposits from banks. With the support of the IMF, the EU and international financial institutions, the Serbian government and the National Bank succeeded in ensuring the stability and capitalization of the banking system. Budgetary measures such as spending cuts and the freezing of nominal wages in the public sector and pensions have largely managed to counter the collapse on the income side. From 2010, Serbia recorded an economic recovery again,
As a result of decreasing budgetary discipline, political conflicts with the EU over Kosovo and the progress in the EU integration process as well as new instability in the euro area, there was another reversal in economic development from the end of 2011: industrial production began to fall again and reached mid-2012 – 4.0 percent. international rating agencies have downgraded Serbia’s creditworthiness and foreign investors have begun to withdraw capital from the country on a large scale.
The IMF standby arrangement from February 2015
After more than two years of internal struggle by the SNS-led government with the threat of national bankruptcy and the necessary, far-reaching economic reforms, the International Monetary Fund (IMF) approved a standy agreement with the Serbian government in February 2015.
It comprises loans amounting to 1.2 billion euros for the macroeconomic stabilization of Serbia and is based on comprehensive reform conditions and commitments by Belgrade. This includes, on the one hand, fiscal consolidation, which aims to reduce the government deficit from 6.6 percent of gross national product (2014) to 3.5 percent by 2017, and, among other things, provides for an annual reduction in the number of government employees by 25,000. On the other hand, Belgrade is committed to comprehensive structural reforms: to an administrative reform, a reform of public companies and the solution of the problem of 514 companies that are in the so-called restructuring process by the end of 2015. Behind this “solution”
To cushion these structural reforms and to finance them, the World Bank and the European Bank for Reconstruction and Development are providing additional loans amounting to 600 million euros.
In February 2018, Serbia successfully completed its three-year loan program with the IMF. Overall, the IMF praised Serbia’s economic development, which in some areas, such as budget consolidation, was more positive than forecast. Nevertheless, there is still a need for reform, for example in the reform of public institutions, state-owned companies and in improving the business climate. Against this background, the Serbian government agreed a 30-month Policy Coordination Instrument (PCI) with the IMF in July 2018, a program to support structural reforms, albeit without a new loan.
In its interim report at the end of 2019, the IMF confirmed that Serbia had an overall stable tax and budgetary position, but criticized the delay in reforms relating to public administration, i.e. reforms of the salary system and the employment system in the public sector, and called for further structural reforms in public companies.
Non-transparent large foreign investments
As one of the means by which the Serbian government has tried to stimulate the economy in recent years, large-scale foreign investment has become the focus of public interest and criticism. As a result of international advertising by the government and Prime Minister Vučić himself, Belgrade was able to announce several major investments and major projects financed by foreign investors and agreed with the government. The first success was the entry of the airline Etihad from the Gulf state of Abu Dhabi with Air Serbia. Second, the government in Belgrade announced the lease of a huge agricultural area in Vojvodina to an investor from the United Arab Emirates.Belgrade by the water) on the site of the former Belgrade port.
All of these projects have met with fierce public criticism because of the lack of transparency in the investment arrangements. The respective contracts between the Serbian state and the foreign investors were only made public after strong public pressure. In the case of Beograd na vodi, at the end of April 2014, the government defied all urban planning requirements in the form of a lex specialis, a special law that declared the building area to be a special building zone. Against the project, its interventions in the urban structure and its alleged economic viability, protests from economists, town planners and a citizens’ movement are stirring.
In the case of Air Serbia, the Serbian government’s economic policy approach has now shown its limits: In 2017 and 2018, the airline, in which Etihad acquired a 49 percent stake in 2013, slipped into the red. According to the contract, Serbia, and with it the taxpayers, is responsible for compensating the losses. The negative corporate development led to public speculation in June 2018 and denials by government officials that Etihad was planning to withdraw from the company.