ECONOMY
Serbia's economic progress since the fall of Milosevic has been substantial, with output up nearly 46% since 2000. The stable dinar, a budget surplus, and a restructured financial sector all demonstrate the success of stabilization policies. The short-term economic outlook for Serbia is positive, but enterprise restructuring and unemployment remain major challenges.
Growth in 2007 was a healthy 7%, but this pace slowed during the first quarter of 2008. Through September of 2007, due to continued central bank policy to target inflation, the inflation rate averaged 7.4%. The increase in industrial production of 3.7% in 2007 followed a strong 2006 performance. The current account deficit was 16.6% of GDP in 2007, despite continued growth in exports. Foreign exchange reserves held by Serbia's central bank totaled $14.593 billion at the end of 2007, or an amount covering about 10 months of imports. In March 2007, the National Bank of Serbia completed pre-payment of its debt to the International Monetary Fund (IMF) with a payment of $232 million, which followed a June 2006 payment of $978 million.
In 2006, Serbia recorded its best year yet with respect to foreign direct investment (FDI), but greenfield investment is still rare. A large part of the record U.S. $5.4 billion in FDI for 2006 was realized from the sale of the leading mobile telephone company to Norwegian company Telenor for Euro 1.5 billion. The Government of Serbia has also adopted a strategy for oil company NIS that calls for gradual privatization, with initial sale of a 25% stake and management control to a strategic investor. During the first eight months of 2007, FDI totaled $1.047 billion.
The privatization of the banking sector has been completed, with over 70% of assets owned by foreigners. In the last major deal, National Bank of Greece signed a deal in September 2006 to buy Vojvodjanska Banka, Serbia's sixth-largest bank by assets, for Euro 385 million.
While economic reform has been moving forward in many areas, enterprise sector reform is still halting. Over 26% of all persons employed in Serbia work for state owned enterprises or the central and local governments. Privatization of the least attractive socially-owned companies, which still employ about 235,000 workers, has been left for the very last. They still place a drag on the economy via substantial fiscal and quasi-fiscal subsidies. Even successful privatization of socially-owned enterprises often means jobs losses, and this, together with the overall lack of greenfield investment, has driven unemployment to 19%.
While economic growth in Serbia continues at a healthy clip, this indicator alone may be misleading. Serbia is still far behind its neighbors, with GDP still only 65% of the level in 1989; production volumes have reached only 45% of that recorded when Serbia was part of the Yugoslav economy. Sectors such as textiles, motor vehicles, and electronic equipment have never recovered from the depression of the 1990s.
GDP (2006): $19.9 billion.
GDP growth rate (2006): 5.8%.
GDP per capita (2006): $3,382.
Inflation rate (2006): 6.6%.
Natural resources: Coal, petroleum, natural gas, antimony, copper, lead, zinc, timber, bauxite, gold, silver, navigable rivers.
Agriculture: 12% of GDP.
Industry: 20% of GDP.
Services: 68% of GDP.
Trade (2006 est.): Exports--$6.4 billion. Major markets--Italy, Germany, Bosnia. Imports--$13.2 billion. Major suppliers--Germany, Italy, Russia.
