EU encourages Serbia to reinforce medium-term sustainability of public finances, further improve the business environment for investment, green the energy sector and fully open the energy market and increase employment and social protection against poverty.

Representatives of the EU Member States, the Western Balkans and Turkey, the European Commission, the European Central Bank, and representatives of the central banks of the Western Balkans and Turkey[1] met today for their annual economic policy dialogue[2] in Brussels. The dialogue aims at preparing the Western Balkans and Turkey for their future participation in the European Semester. This year, the meeting focused on the strong solidarity between the EU and the Western Balkans and Turkey in providing medical and financial assistance to fight the COVID-19 pandemic and, addressing its socio-economic impact.  Participants welcomed the overall timely, fiscal and monetary support measures adopted by the Western Balkans and Turkey. The dual digital and green transition was emphasised to build up economic resilience in the longer term. Participants encouraged the Western Balkans and Turkey to foster a strong recovery via further improvement of their macroeconomic, budgetary and structural policies.

Serbia’s macroeconomic policy was assessed positively, with a mild contraction in 2020, and Serbia successfully mitigated the impact of the COVID-19 crisis with a strong pre-crisis momentum, sizeable and timely fiscal and monetary support measures, the sectoral structure of the economy and a relatively low stringency of containment measures. In the medium term, fiscal consolidation and sustainability of public finances will be important after a rise in the general government deficit and the debt-to-GDP ratio. Structural reforms related to estate owned enterprises, revenue fiscalisation and electronic invoicing should further contribute to the medium-term policy credibility and reduce the informal economy.

In the light of the above assessment, Serbia and the EU agreed on six recommendations that can be found under the following link: https://data.consilium.europa.eu/doc/document/ST-10622-2021-INIT/en/pdf  .

State Secretary in the Ministry of Finance Gojko Stanivuković stated that owing to prudent macroeconomic and fiscal policies prior to the pandemic, from the very onset of the coronavirus pandemics, Serbia has managed to steer successfully through the economic and health challenges. The Government adopted three comprehensive packages of economic measures aimed at supporting households and businesses, preserving jobs and improving the health system. The total planned package of measures reached 17.4% of GDP and is expected to further contribute to the GDP growth with the aim of stabilizing it at about 4% in the medium term. State Secretary Stanivuković also said that thanks to the program of support to the economy and the population, an economic activity recorded a strong recovery in the second half of the year, and in the first quarter of 2021 GDP exceeded the pre-pandemic level. The monthly dynamics of economic activity continued to grow during April and May, so that GDP growth in the first five  months, amounted to 6,9% y-o-y. The real GDP growth of 6.0% is projected for 2021, with further increase in capital spending for general government to 7.2% of GDP. In parallel with economic measures, accelerated vaccination of the population, which is a huge success, helps further the opening of the domestic economy and foster economic recovery. In terms of structural reforms we remain committed to strengthen good governance, continue digitalization process, modernize tax administration, further improve business environment and combat the informal economy, and foster green, energy-efficient and inclusive growth, concluded the State Secretary.  

Sem Fabrizi, EU Ambassador to Serbia “welcomed efforts that Serbia made in weathering the economic impact of the COVID-19 pandemic. Serbia’s post-pandemic recovery path will benefit from the ability to address the identified structural reforms and effectively implement economic support packages provided by the EU. This includes the Economic and Investment Plan through which the EU is bringing significant investment opportunities to the Western Balkans region and Serbia. In doing so, further efforts should be invested into addressing challenges that were highlighted in the past, such as improving the rule of law, enhancing regulatory transparency and strengthening of the institutions, along with ensuring proper compliance with public procurement, state aid and technical standards notably on all big infrastructure projects. Major investments are needed to modernise energy infrastructure and to adopt stringent lower carbon emissions policies.”

Governor Jorgovanka Tabaković “expressed satisfaction with the assessment that the economic fallout from the pandemic in Serbia was mitigated also by the strong pre-crisis momentum and the achieved diversification of export markets. As for the European institutions’ view that in a timely and forceful response, the NBS provided significant support to fast economic recovery in Serbia, the Governor said that the NBS measures supported citizens, businesses and government in overcoming this crisis more easily in financial terms at a time when they needed such support the most, which helped preserve consumer and investment confidence and ensure smooth functioning of the financial system. The results highlighted by the European institutions, such as the maintained low inflation and anchored inflation expectations, exchange rate stability and the adequate level of FX reserves, only show that the NBS has remained a guarantor of stability. Governor Tabaković particularly underlined the importance of the strategic decisions of President Aleksandar Vučić, which enabled Serbia to respond strongly to the pandemic and to make a swift recovery“. “Owing to a responsible conduct of economic policy in the past nine years, timely and large-scale monetary and fiscal policy measures, and a successful vaccination strategy, our GDP exceeded its pre-crisis level already in the first quarter of 2021.  All this together, along with the continuation of reforms and investment, will result in Serbia recording one of the highest growth rates in Europe this year, as it was the case last year”, concluded the Governor.

[1] Montenegro, the Republic of Serbia, the Republic of North Macedonia, the Republic of Albania and the Republic of Turkey are candidate countries for EU accession.

[2] The conclusions of this dialogue are without prejudice to EU Member States´ positions on the status of Kosovo.