Country Forecast Serbia August 2017 Updater

Country Forecast Serbia August 2017 Updater

  • August 2017 •
  • Report ID: 1697975 •
  • Format: PDF


  • On April 2nd the then prime minister, Aleksandar Vucic, won a landslide victory in the first round of Serbia's presidential election, and thereby further strengthened his grip on Serbia's political scene.
  • Mr Vucic has appointed Ana Brnabic, previously the minister of public administration and local government, to succeed him as prime minister.
  • The Serbian Progressive Party (SNS) won a parliamentary majority in the pre-term election in April 2016. The Economist Intelligence Unit expects the SNS-led government to serve a full term to 2020.
  • Serbia was invited to begin EU accession negotiations in January 2014 and has opened several chapters. We expect the country to make steady progress in opening more chapters, but talks will be prolonged and membership is not likely by the end of the government's term, in 2020. Serbia will remain under pressure from the EU and the US to "normalise" relations with Kosovo.
  • The government will pursue reforms and achieve modest results, reforming the public sector, the labour market and the business environment. The government needs to simplify business laws and regulations, and modernise the tax and customs administration.
  • In February 2015 the government and the IMF agreed on a new three-year precautionary stand-by arrangement for 2015-18. We expect the good progress made in 2015-16 to continue to the end of the programme, which focuses on three main issues: fiscal consolidation, strengthening the banking and financial system, and restructuring the real economy through rationalising the state-owned enterprise sector (largely through bankruptcy and privatisation), with a view to cutting subsidies to these entities.
  • A fiscal adjustment in excess of 5 percentage points of GDP constrained growth in 2014-16-real GDP grew by 2.8% in 2016. Growth is expected to slow to 2.6% in 2017 and to average 3.5% per year in 2018-21. Investment growth is picking up, but we are concerned about the negative effect of capital underspending on potential growth over the medium to long term.
  • In 2016 the current-account deficit narrowed to the equivalent of 4% of GDP. We forecast that the deficit will widen to 4.3% of GDP this year and average 3.8% of GDP per year in 2018-21. Foreign direct investment inflows picked up in 2015-16, and we forecast a steady increase as Serbia's improved business environment and prospective EU integration make the country more attractive to investors.


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