Serbia Freight Transport Report 2007

Under a national plan aimed at economic development and infrastructure upgrades, Serbia would allocate EUR1.675bn (US$2.127bn) for capital investments by the end of 2007, the Finance Minister Mladjan Dinkic said in September 2006. Transport would figure prominently in the plan. 'Our main goals are to upgrade infrastructure, encourage economic development and modernise the health care system,' Dinkic told a news conference adding that 70% of the funds would go to those sectors. The main projects, which would be financed under the national plan, would be the construction of two sections of the pan-European transport corridor X in southern Serbia. The government had decided earlier that it would finance from own sources the construction of two motorway sections leading to neighbouring Bulgaria and Macedonia. In fact, in BMI's new Serbia Freight Transport Report, we forecast that freight carried by road will grow by an annual average of 6.6% in the 2006-2010 period.

Various factors support this prediction. Although the risks to growth remain high, BMI is forecasting that the Serbian economy will grow at an annual average rate of 6.3% over the 2006-2010 forecast period. We believe that the freight transport sector as a whole will grow slightly faster at 6.8% per annum over the same period, measured in million-tonnes-km. The driver for this growth will be continued recovery from the disruption caused by the wars of the 1990s and at least the potential of closer integration with the European Union and in particular with neighbouring new EU members, which will be enjoying rapid economic and trade growth. This, together with Serbia's role as an East-West transit corridor, should lead to greater demand for freight across road haulage, rail, pipeline and river transport modes. By transport modes, we see greatest growth in air freight, which will expand by an average of 9.4% per annum, lifted by expansion of capacity as expanding tourism and low-cost carriers begin to have a greater influence on this small sector. It will be followed by pipeline throughput, up by an annual average of 7.5%, mainly as a result of the new pipeline agreement with Russia's Gazprom. We expect rail freight to grow by 6.9% per annum on average. Serbia scores 35 in our freight business environment ranking, out of a theoretical potential maximum of 70. This places it below the average for its European peers, which stands at 39. The country scores best in transport intensity - a measure of the dynamism of foreign trade - and reasonably well in freight and infrastructure growth. Areas for improvement include overall economic and political risk as well as the regulatory environment.

For the 2006-2010 forecast period, we expect the transport and communications sector to continue outpacing the economy as a whole. It will achieve average annual growth of 6.9%, versus 6.3% for overall GDP. The total value of transport and communications GDP will rise to US$5.27bn in nominal terms by 2010, representing 8.5% of Serbia's GDP.