Country Report Serbia March 2013

Country Report Serbia March 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 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 economic downturn, high levels of unemployment and resurgent inflation.
• Serbia may be invited to begin EU membership negotiations in 2013, although Germany seems reluctant to countenance further steps towards enlargement.
• The Economist Intelligence Unit forecasts insipid growth in 2013, of 1%, following an estimated real GDP contraction of 1.7% in 2012. We expect growth to average about 4% per year in 2014-17.
• We forecast a gradual, modest reduction in the current-account deficit during 2013-17, measured as a percentage of GDP, following an increase in 2011-12.

Review

• A scandal about excessive aflatoxin in milk, caused by contaminated fodder, has deepened popular distrust of the political elite.
• Talks between the Serbian and Kosovo prime ministers in late February and early March ended without an agreement on Serb-run institutions in Kosovo.
• The European Commission may recommend in its April report that Serbia be granted a conditional start date for EU accession talks.
• On February 14th, the Democrat Party (DS) expelled Vuk Jeremic, president of the UN General Assembly and Serbia's former foreign minister.
• The former chief of staff of the army of Yugoslavia, Momcilo Perisic, was acquitted, on appeal, by the International Criminal Tribunal for the former Yugoslavia (ICTY) of war crimes charges in the period 1993-95.
• The National Bank of Serbia (NBS, the central bank) raised its benchmark two-week repo rate by 25 basis points, to 11.75%, on February 5th.
• On February 14th, the Serbian government successfully placed US$1.5bn of seven-year government bonds on the Eurobond market, at a rate of interest of 4.875%, well down on the rates carried by other recent Serbian bond issues.
• The consumer price index increased by 0.6% month on month and 12.8% year on year in January.

Do to the nature of this product there is no table of contents.