Serbia: Background and U.S. Relations Page: 7 of 18
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Serbia: Background and U.S. Relations
According to the Economist Intelligence Unit (EIU), Serbia's economy has struggled over the
past few years, but recent trends point to an improvement in the country's growth prospects.8 The
International Monetary Fund (IMF) recently indicated that Serbia's economy had "strengthened
dramatically" since the IMF and Serbia agreed to a three-year, $1.2 billion standby loan
agreement in early 2015.
The IMF loan included slashing the size of Serbia's public sector and fighting corruption. Since
2015, the government has hesitated to take unpopular steps, such as massive job cuts and selling
off or shutting down heavily subsidized state-owned firms, which would have increased
unemployment. The IMF has indicated that conditions established for the loan program, however,
have not been totally addressed, and it has criticized delays in structural reforms, including selling
off the large indebted utility and mining companies. Nevertheless, an IMF mission that visited
Serbia between February 27 and March 6, 2017, apparently issued a more positive assessment of
the program's progress.
Investment, industrial output, and exports have gained momentum since the early months of
2016. In the first four months of 2016, industrial production grew by 9.9% year-on-year, as did
retail trade, and real net wages grew. The EIU reports that real GDP grew overall by 2.8% in
2016, stronger than the government's projection of 2.3% and most other forecasters' predictions.
EIU expects a modest acceleration in GDP growth in 2017-2021, to an average of 3.3% per year.
The estimated unemployment rate for Serbia is relatively high; for 2016, it was 18.9%.9 Serbia's
main exports include machinery, manufactured goods, food, and chemical products. Serbia's main
trading partners include Italy, Germany, and Russia.
Two significant issues continue to stunt Serbia's economic growth. One, according to the
European Bank for Reconstruction and Development (EBRD), is that small and medium-sized
enterprises (SMEs), which form the backbone of the Serbian private sector, face limited access to
financing. The EBRD has established a program to assist SMEs in financing projects conducive
to sustainable growth.'0 The second, according to the EIU, is weak foreign direct investment
(FDI) in recent years, a problem Vuci6 is trying to address. One example cited by Vuci6 (and used
as evidence that his policies for economic recovery are reaping success) was the announcement in
August 2017 that Ikea would open a large store in Belgrade that would employ thousands of Serb
workers. Another indication of Serbia's potential as a good place for foreign investment was the
2017 scheduled visit of Turkish President Recep Tayyip Erdogan. Although Erdogan has some
issues with Serb institutions allegedly connected with Turkish cleric Fethullah Gulen, who is
accused by the Turkish authorities of being the mastermind of the failed coup in 2016, Erdogan's
visit could likely include concrete business agreements. With some 20 Turkish businesses already
registered in Serbia, Erdogan was reportedly bringing over 100 Turkish businesspeople interested
in economic projects involving an extension of the Turk Stream gas pipeline to Serbia, as well as
Serbia's textile industry and infrastructure construction, including several highway proj ects."
8 Economist Intelligence Unit, "Country Report: Serbia," August 2017.
10 European Bank for Reconstruction and Development, "Country Overview: Serbia," 2017.
" "Turkey's President Erdogan to Visit Serbia," BalkanInsight, August 9, 2017.
Congressional Research Service
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Morelli, Vincent L. Serbia: Background and U.S. Relations, report, September 19, 2017; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1042360/m1/7/?q=terrorism: accessed May 24, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.