Serbia has recorded a significant slowdown in the growth of social product in the first two quarters of this year. After several years in which GDP grew above expectations, such a turnaround leads to consideration of whether this is an unfortunate combining of numerous independent factors – a bad year for the power industry, a long strike in the leading exporter and drying company – or whether bad results point to Serbia’s economic growth facing serious systemic obstacles.
The government’s attention is currently focused on short-term measures to incentivise GDP growth, primarily to accelerate capital investments, as potentially the strongest and highest quality engine of economic activity. In the long run, economic growth must primarily rely on the growth and development of the private sector of the economy.
The reasons for the slowdown in GDP growth highlight the important characteristics of the Serbian economy that can only be addressed through dedicated work. One of these characteristics is the unfinished reform process in public companies, the second is an export structure in which a few large companies still determine total export performance, while the third is the high vulnerability of the economy to atmospheric conditions and its low resistance to external shocks.
Various Serbian governments from the beginning of the transition process to this day have tried with greater or lesser success to respond to the economy’s observed structural weaknesses. The last three years have seen encouraging shifts made in regulating the situation in public companies, among other things also because the government decided to rely on professional and financial assistance from numerous international financial institutions. The job, however, is not done and undoubtedly needs to be addressed regardless of whether or not Serbia decides to conclude a new arrangement with the International Monetary Fund.
The export performance of the Serbian economy has improved primarily thanks to a proactive relationship with foreign investors that have brought export-orientated production to Serbia and contributed to the improvement of the business climate, which, judging by the results achieved, has favoured all companies, both domestic and foreign.
The export performance of the Serbian economy has improved primarily thanks to a proactive relationship with foreign investors that have brought exportorientated production to Serbia and contributed to the improvement of the business climate
Solid progress in this field is largely the result of a different relationship between the government and the private sector. Even though it still happens today that some regulations are amended without consultation with the sector of the economy, there are considerably fewer such cases than before. Open and constructive dialogue with the business sector, based on reliance on the expert capacities brought by companies that operate here and the organising of high-quality discussions and argumentbased debate, have contributed to removing some enduring obstacles.
One of the pioneers in creating space for this dialogue between the public and private sector is the Foreign Investors Council, which this year marks 15 years of its existence and 14 years of publishing the annual White Book, which is a kind of testimony to the transition path of the Serbian economy.
At the start of the year, based on the initiative of the government, or rather its then prime minister, a working group was formed between the Government of Serbia and the Foreign Investors Council, which, through six sub-groups, thematically addresses identified problems precisely targeted in the domain of tax policy, labour legislation, inspections and food safety, real estate and construction, e-business, bankruptcy and foreign exchange operations.
The objective that has been set is to annually adopt 50% of recommendation contained within the White Book. Even if this objective is not met in the first year of work, the willingness to work on these issues provides hope that the problems slowing down the growth of the Serbian economy will be addressed even on the broadest reform front and on the ground where the desired GDP growth is actually realised.