Country Report Serbia January 2013

Country Report Serbia January 2013

Outlook for 2013-17

• The coalition government-comprising the Serbian Progressive Party (SNS), the Socialist Party of Serbia (SPS), United Regions of Serbia (URS) and some independents-may face a popular backlash if economic difficulties persist.
• The acquittal by the ICTY of several former Croatian and Kosovo Albanian military commanders accused of war crimes against Serbs may have a radicalising effect of Serbian and regional politics.
• The government faces tough economic policy challenges, particularly the need to consolidate state finances and reduce public debt.
• The government is expected to negotiate a new stand-by agreement with the IMF for 2013-15, to reassure international markets and foreign investors.
• Public dissatisfaction is expected to grow, given the recession, high levels of unemployment and resurgent inflation, and there is a risk of social unrest.
• Serbia may be invited to begin EU membership negotiations in 2013, although Germany seems reluctant to countenance further steps towards enlargement, and membership remains a distant prospect.
• The Economist Intelligence Unit forecasts insipid growth in 2013, of 1%, following an estimated real GDP contraction of 2% in 2012. We expect growth to average 3.6% per year in 2013-17.

Review

• On November 21st Aleksandar Vucic, the first deputy prime minister, announced a new campaign against corruption. A series of arrests followed.
• The Democratic Party (DS) extraordinary assembly on November 25th elected Dragan Djilas as the new head of the party, following the earlier withdrawal of the incumbent, Boris Tadic.
• On November 16th and 29th the ICTY acquitted individuals accused of war crimes against Serbs, causing outrage in Serbia.
• Russia approved a US$1bn loan for budget support in 2012-13 on November 22nd and an US$800m loan for infrastructure development on November 23rd.
• On December 1st parliament adopted the budget for 2013, the first time for years that the budget has been adopted within the deadline.
• The October industry data were an improvement on earlier months, but in January-October the year-on-year drop in industrial output was 3.2%.
• The merchandise trade deficit grew by 7.8% year on year in euro terms in January-October, but fell by 1.2% in US dollar terms.

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