September 04, 2012
by Ina Dimireva – last changed on January 30, 2017
Serbia – along with 5 other Western Balkans countries – was identified as a potential candidate for EU membership during the Thessaloniki European Council in 2003. In 2008, a European partnership for Serbia was established, setting priorities for the country’s application for membership, and in 2009 Serbia officially applied. In March 2012 Serbia was granted EU candidate status. A Stabilization and Association Agreement between the EU and Serbia came into force in September 2013. In line with the June 2013 European Council decision to open accession negotiations with Serbia, the Council adopted the negotiating framework in December 2013 and agreed to hold the 1st Intergovernmental Conference with Serbia in January 2014. On January 21, 2014, the 1st Intergovernmental Conference took place, which signaled the formal start of Serbia’s accession negotiations.
Member of the Schengen area: No
Political system: republic
Total area: 77,474 km²
Population: 7.4 million
Currency: Serbian dinar
Serbia has a transition economy largely dominated by market forces, but the state sector remains important in certain areas and many institutional reforms are required. The economy relies on production and exports, which are mainly driven by foreign investment. The mismanagement of the economy in the MILOSEVIC era, a prolonged period of international economic sanctions, a civil war and the damage to Yugoslav infrastructure and industry during the NATO air strikes in 1999 left the economy only half the size of 1990.
After the overthrow of the former Yugoslav President MILOSEVIC in September 2000, the coalition government of the Democratic Opposition of Serbia (DOS) implemented stabilization measures and started a program of market reform. Serbia renewed its membership in the IMF in December 2000 and rejoined the World Bank and the European Bank for Reconstruction and Development. Serbia has made progress in trade liberalization, as well as corporate restructuring and privatization, but many large companies – including utilities, telecommunications companies, natural gas companies and others – remain state-owned. Serbia has made some progress towards EU membership by signing a Stabilization and Association Agreement with Brussels in May 2008 and fully implementing the Interim Trade Agreement with the EU in February 2010, gaining candidate status in March 2012. Serbia’s EU accession talks officially opened in January 2014. Serbia’s negotiations with the WTO have advanced, with the total ban on the trade and cultivation of agricultural biotechnology products being the main remaining obstacle to accession. Serbia’s program with the IMF was frozen in early 2012 because the 2012 budget approved by parliament deviated from the program parameters; the agreement is now void. In late 2014, Serbia and the IMF announced a preliminary plan for a precautionary loan of around $ 1 billion, but the government is challenged to implement IMF-mandated reforms targeting social spending and the large public sector.
High unemployment and stagnating household incomes are persistent political and economic problems. The structural economic reforms necessary to secure the country’s long-term prosperity have largely stalled since the beginning of the global financial crisis. Growing budget deficits limit the use of stimulus measures to stimulate the economy and add to growing concerns about a sovereign debt crisis, as Serbia’s total national debt-to-GDP ratio more than doubled between 2008 and 2014. Interest rate stability exclude the use of an expansionary monetary policy. In 2014, the SNS party dealt with issues such as budget deficit, state-owned enterprises, labor market, building permits, bankruptcy and privatization and other areas.
The main challenges ahead include: high unemployment rates and the need to create jobs; high government spending on salaries, pensions, health care and unemployment benefits; a growing need for new government borrowing; increasing public and private external debt; Attracting new foreign direct investment; and get the IMF program back on track. Other serious longer-term challenges include an inefficient judicial system, high levels of corruption and an aging population. Factors favoring Serbia’s economic growth include its strategic location, relatively cheap and skilled workforce, and free trade agreements with the EU, Russia, Turkey and the countries that have signed up to the Central European Free Trade Agreement.
EU delegation to the Republic of Serbia
Source: European Commission, The World Factbook