Serbia Business Forecast Q1 2007

Content

• Chapter 1: Political Outlook
  • BMI Core Scenario
  • SWOT Analysis
  • BMI Political Risk Ratings
  • Domestic Political Outlook
  • Early Elections Expected After Referendum
  • A new Serbian constitution, which defines Kosovo as an integral part of Serbia, has been approved through
  • a referendum While we are concerned that the constitution may complicate efforts for a permanent solution
  • to the Kosovo issue, we feel that it could be an important basis for future political convergence with the EU
  • Table: Republic of Serbia - Cabinet & Other Key Posts, October '06
  • Regional Political Outlook
  • Western Balkans: Waiting In Line
  • Any lingering hopes for speedy EU accession in the Western Balkans have been laid to rest by the European
  • Commission's latest enlargement report, with Croatia the only state almost certain to accede in the next 10 years
  • A closer focus on developing the domestic business and investment climate, as well as forging tighter regional
  • co-operation, should be the new short-term focus for the Balkan states, softening the latest blow to EU ambitions
  • Table: EU NEGOTIATIONS
• Chapter 2: Economic Outlook
  • BMI Core Scenario
  • SWOT Analysis
  • Introduction
  • Kosovo: The Economic Implications Of Final Status
  • The year-end deadline for deciding the final status of Kosovo is looking increasingly like being missed This
  • is not only a negative for Serbia's own EU ambitions, but also means that further economic reform and
  • investment in Kosovo will be delayed Only when the future of the province is decided can significant
  • progress be made
  • Table: South East Europe Real GDP Growth Forecasts (% Y-O-Y)
  • Economic Activity
  • Imbalanced Growth Path
  • Serbia continues to record solid GDP growth, prompting us to raise our end-year forecast to 63% Looking
  • ahead, the country should enjoy similarly robust annual expansions over the forecast period, though political
  • risks and wide economic imbalances will continue to pose a short-term threat to stability
  • Table: Nominal And Real GDP
  • Exchange Rate Policy
  • Dinar Shoots Upwards As Price Growth Plummets
  • Strong gains by the dinar this year have helped bring inflation down to single figures, from over 17% at
  • end-2005, and we have lowered our end-year forecast to 75% The National Bank of Serbia now has some
  • room to ease monetary policy, though with fiscal expansion expected next year, it must remain cautious
  • of reversing recent trends
  • Table: Inflation, Interest Rates, And Money Supply
  • Table: BMI EMERGING EUROPE SOVEREIGN RATINGS
  • External Debt
  • Making Positive Strides
  • The government has been largely successful in reducing its external obligations, a crucial achievement given
  • the rapid increase in private-sector foreign borrowing Serbia's position in our sovereign risk ratings has
  • improved dramatically in 2006, though ongoing risks to political stability continue to weigh down on our score
  • Montenegro
  • Solid Fundamentals, But Much Work Still Needed
  • Montenegro's economy, at first glance, appears to be one of the most stable in the South East Europe region
  • However, inadequacies in the domestic business environment are contributing to wide external imbalances,
  • and much investment is needed to diversify the economy away from the profitable tourism industry
  • Table: Montenegro: Macroeconomic Data & Forecasts
• Chapter 3: Special Report
  • BMI Sovereign Risk Ratings
  • What And Where Are The Risks?
  • Table: BMI Sovereign RIsk Ratings
  • Emerging Europe
  • Diverging Ratings Trends
  • Table: Emerging Europe Sovereign Ratings - Evolution of Ability to Pay
  • Table: Emerging Europe Sovereign Ratings - Evolution of Willingness to Pay
• Chapter 4: Business Environment
  • BMI Core Scenario
  • SWOT Analysis
  • Legal Issues
  • Labour Force
  • Table: Demographic Indicators
  • Table: Employment Indicators
  • Foreign Investment Policy
  • Foreign Trade Regime
  • Table: Emerging Europe, Annual FDI Inflows
  • Table: Serbia & Montenegro, Annual FDI Inflows
  • Tax Regime
• Chapter 5: Key Sectors
  • Pharmaceuticals
  • Market Overview
  • Over the forecast period, sector spending is likely to reach US$6077mn at consumer prices Per-capita drug
  • expenditure is also forecast to increase, reflecting the greater availability of medicines and increasing
  • per-capita income, although the latter remains vulnerable to the wider economic climate in the country
  • Table: Serbia & Montenegro Prescription Drug Market Indicators