Serbia’s government is heading towards early general elections on April 24 with renewed confidence as a set of economic reforms is gaining traction and getting the country's economy back on track after a few challenging years.

After taking office in April 2014, the government, led by conservative, pro-EU prime minister Aleksandar Vučić, set in motion an IMF-backed reform programme aimed at stabilising the country’s economy and public finances. Economic growth bounced back to 0.8% in 2015, from a 1.5% slump a year earlier, when heavy flooding took a costly toll both in terms of human lives and structural damage along the Sava and Marava river basins. The government expects GDP growth of 1.8% in 2016 – a solid recovery from two years earlier, but still "slower than in all comparable countries in central and eastern Europe", the government-appointed Fiscal Council has said in a report.


Recovery mode

Appointed in July 2015, finance minister Dusan Vujovic devoted his first months in office to regaining control of Serbia's public finances. Fiscal consolidation measures contributed to reducing the budget deficit to 3.7% in 2015 from 6.6% a year earlier. Adverse currency fluctuations negatively affected public debt, which grew to 77% of GDP at the end of 2015, but that is expected to peak “soon”, Mr Vujovic tells fDi Magazine on the sidelines of the European Bank for Reconstruction and Development’s Western Balkans Investment Summit held in London in February.

In a move aimed at cementing the rule of his Serbian Progressive Party (SNS) and giving him ample room to deal with the ongoing EU accession process, Serbia's prime minister called early general elections in January. Should the SNS gain a new majority, as expected, this will add new momentum to the ongoing economic reform process.

“My perception is that elections are supposed to strengthen the ownership of reforms and improve the overall performance,” says Mr Vujovic. “The main economic goal of the elections is to strengthen and reconfirm... our commitment to move on with what we have started.”

As fiscal consolidation kicks in, government policymakers have shifted their focus on a set of key reforms aimed at slimming the role of the state in the domestic economy and reforming its public administration. The privatisation of hundreds of poorly performing state companies, which have been draining resources from the national budget for years, is under way and the process is being supported by a new privatisation law approved in 2015.

The privatisation process features the sale of 17 large strategic assets, which is expected to be wrapped up by May 31, according to Mr Vujovic. However, setbacks are still creating delays. A tender for a    58.1% stake in Telecom Srbija, the national telecommunications company that is the most coveted asset of the whole privatisation programme, was called off in December as “in our assessment the offers we received were not high enough, and we immediately hired an advisor that is now looking for alternative solutions, including a management service agreement,” according to Mr Vujovic.

Infrastructure boost

Beyond privatisation, Mr Vujovic says: "I would like to see more FDI into greenfield investment. There is a huge scope for logistics and infrastructure projects in Serbia.” 

Western Balkans countries, including Serbia, are stepping up their efforts to strengthen transport and energy infrastructure on a regional level – a challenging process given the legacy of political and ethnic tensions inherited from the old Yugoslavia and the bloody conflicts that originated from its collapse.

In this field, the government priorities remain the development of the road and railway Corridor X and Corridor IV, which will connect Belgrade with central Europe and the port of Bar in Montenegro (Corridor X), and an intermodal terminal in Belgrade (Corridor IV). Foreign investors from locations such as China, the EU and Turkey are already actively engaging with Serbia to fully develop these projects.