In Serbia we focus on:
Enhancing the role and competitiveness of the private sector. Serbia’s level of private sector engagement in the economy is modest even by regional standards. Small and medium sized enterprises (SMEs), which form the backbone of the Serbian private sector, face limited access to finance. The EBRD will thus work to increase private sector competitiveness, with an added focus on the agribusiness value chain. We will seek to assist SMEs in financing projects conducive to sustainable growth. Finally, we will further support pre-privatisation and privatisation alongside strategic investors.
Bolstering the banking sector and deepening the financial intermediation. While the financial sector has survived the crisis, its role as a driver of economic growth has been significantly diminished. Credit growth is weak, the share of non-performing loans is significant and the level of euroisation is high. In line with the Joint IFI Action Plan for Growth in Central and South-Eastern Europe, we will seek to help stabilise the financial sector. We will continue our policy dialogue, directly with the National Bank and through the Vienna Initiative 2.0, to encourage local currency lending and improve cross-border cooperation on banking sector issues and help in resolving the problem of NPLs.
Developing sustainable and efficient public utilities. Large transition gaps remain in the energy and infrastructure sectors. Other transition challenges include: adjusting tariffs to cost recovery levels, strengthening the regulators’ capacity, commercialising and restructuring public enterprises, and increasing private sector participation. The EBRD will focus its efforts on accelerating the implementation of its already financed projects and, given the limited fiscal space, will carefully select new investments. In the energy sector in particular, we will aim to continue to play a key role in promoting energy efficiency and renewable energy, while assisting with replacing the aging electricity generation capacity and bringing power generation into compliance with the EU environmental standards.
The EBRD latest Serbia Strategy was adopted on 27 February 2018
Serbia's policy response to the coronavirus crisis
The EBRD is monitoring Serbia's policy response to the coronavirus pandemic. Our biweekly publication identifies the major channels of disruption as well as selected impact and response indicators.
Current EBRD forecast for Serbia’s Real GDP Growth in 2020: -3.5%
Current EBRD forecast for Serbia’s Real GDP Growth in 2021: 3.0%
GDP growth was strong in the first quarter of 2020, at 5.0 per cent year-on-year, driven by consumption, government expenditure and investment. At the same time, exports growth softened to 3.1 per cent year-on-year, the slowest quarterly rate since 2014. The second quarter of 2020 saw a fall in economic activity of 6.5 per cent year-on-year on the back of stringent lockdown measures, bringing overall growth in the first half of 2020 to -0.9 per cent year-on-year.
The impact of Covid-19 is less severe than in some peer countries, partly because of the high contribution of manufacturing of basic products to the overall output. FDI and workers’ remittances both fell by about one-quarter year-on-year in the first half of the year. Inflationary pressures have remained subdued, with the inflation rate averaging 1.5 per cent year-on-year in the first seven months of 2020.
Between March and June 2020, the central bank lowered the key policy rate by a cumulative 100 basis points, to a historical low of 1.25 per cent. The central bank also intervened in the foreign exchange market, with net sales of €1.4 billion in the first seven months of 2020. The exchange rate against the euro has remained stable. Government measures to fight the effects of Covid-19 have focused mainly on preserving employment and increasing liquidity for companies, but the cost of these measures has driven public debt to 58 per cent of GDP by mid- 2020, around five percentage points higher than at the end of 2019.
Overall, GDP is expected to decline by 3.5 per cent in 2020, recovering by 3.0 per cent in 2021. However, risks are weighted to the downside, especially if stricter social distancing measures are implemented in Serbia and in key trading partners.
Serbia in the EBRD’s 2020-21 Transition Report