Serbia country profile

28 August 2006
by eub2 -- last modified 05 January 2008

Serbia is a potential candidate country for the European Union. Following the independence of Montenegro, since 5 June 2006 the Republic of Serbia has been the legal successor of the State Union of Serbia and Montenegro. This in turn resulted from the constitutional restructuring of the Federal Republic of Yugoslavia after the fall of the Milosevic regime.

Serbia

Political profile

Official name	Republic of Serbia
Population	7,498,001 (without Kosovo under UNSCR 1244)
Area	88,361 km²
Density	84 inhabitants per km²
Neighbours	Bulgaria (318 km), Romania (476 km), Hungary (151 km), Croatia (266 km), Bosnia and Herzegovina (302 km), Albania (115 km) and the former Yugoslav Republic of Macedonia (221 km), Montenegro (203 km)
Population profile	Serb, Albanian, Hungarian, Bosniak, Romanian, Croatian, Roma, Bulgarian, Slovak, Vlach etc.
Language(s)	Serbian, Hungarian, Bosnian etc.
Religion	Orthodox, Muslim, Catholic, Protestant, etc.
Life expectancy	Average: 72.39 years, male: 69.31 years, female: 75.72 years (2000)
Sources: Population Division of the United Nations Secretariat, World Urbanization Prospects: The 2003 Revision, Data Tables and Highlights, Republic Statistical Office of the Rep. of Serbia, Official internet site of the Government of the Rep. of Serbia: http://www.srbija.sr.gov.yu.

Political History

Following the independence of Montenegro that was proclaimed on 3 June 2006, the Republic of Serbia is the legal successor of the State Union of Serbia and Montenegro. This in turn resulted from the constitutional restructuring of the Federal Republic of Yugoslavia after the fall of the Miloševic' regime.

At the Serbian presidential elections held in September 2000, Miloševic' was defeated by Vojislav Koštunica, supported by a coalition of opposition parties (Democratic Opposition of Serbia; DOS). At the elections in December 2000, DOS won the majority of seats in the Serbian parliament.

In March 2002, under EU auspices, Serbian and Montenegrin representatives signed the Belgrade Agreement on a restructured State Union. The Constitutional Charter entered into force in February 2003.

On 12 March 2003, Serbian Prime Minister Djindjic' (Democratic Party – DS) was assassinated. The Government reacted by calling the state of emergency and Z. Živkovic' (DS), was elected Prime Minister. After early parliamentary elections in December 2003 a new, minority, Government under the leadership of V. Koštunica (Democratic Party of Serbia - DSS) was formed in March 2004. In the presidential elections held in June 2004 Boris Tadic' (DS) was elected the first democratic President of Serbia.

On 21 May 2006 Montenegro organised a referendum on independence, in line with the provisions of Article 60 of the Constitutional Charter of Serbia and Montenegro. On 31 May 2006 the Republic Referendum Commission confirmed the results, according to which 55.5% of voters expressed their support for independence whereas the turnout reached 86.5% of those eligible to vote. On 3 June 2006 the Montenegrin Parliament adopted the Declaration of Independence.

On 5 June Serbian Parliament, acting in accordance with Article 60 of the Constitutional Charter of Serbia and Montenegro confirmed the continuity of Serbia as a legal successor of the State Union.
The EU and its Member States recognized Montenegro as an independent state and took note that Serbia is the continuing state of the State Union.

On 15 June 2006 the Government of Serbia officially recognised Montenegro as an independent state. Serbia and Montenegro have been settling bilateral issues smoothly.

On 30 September 2006, the Serbian Parliament adopted a new Constitution that was confirmed by referendum at the end of October. On 10 November 2006, the Serbian Parliament adopted the Implementing Constitutional Law that set also the timeframe of the elections. Parliamentary elections were held on 21 January 2007.

Economic profile

GDP per capita	EUR 2,506
Economic growth	6.3%
Inflation rate (RPI)	17.5%
Unemployment rate	20.8%
Currency (8 Dec 2006)	1 CSD = 100 paras 1 EUR = dinar 82.5 CSD (“floating” exchange rate)
Government budget balance	0.6% of GDP
Current account balance	-10.2% of GDP
Foreign debt	61% of GDP
Trade with EU	Imports to EU (25) 56% of total Exports from EU (25) 49% of total
Sources: International Monetary Fund, national sources, EUROSTAT (Comext, Statistical regime 4)

Economic situation

In 2005 Serbian GDP is estimated to have grown by 6.3% year-on-year driven by strong gains in trade, transportation, financial services and construction, more than offsetting a drop in agricultural output. The trend for 2006 remained strong. Industrial production grew at a modest 1.3%, while showing a robust recovery in the second half of the year. Inflation remained at double digits throughout the year and stood at 17.5% on the year-on-year basis in December, mainly driven by a strong domestic demand, increases in administered prices, rising cost of fuel imports and the one-off effect of the VAT introduced in January 2005, but was also aggravated by the widespread inflation and exchange rate indexation of prices. In 2006 retail price inflation eased somewhat and reached 11.6% ob a year-on year basis in September.

Fiscal policy has been further tightening in 2005 and the consolidated general budget is estimated to have reached a surplus of 0.6% of GDP, reflecting prudent budget execution amid lower than expected revenues, and measures to curb subsidies and transfers. Monetary policy has been challenged to stem the rapid expansion of broad money and robust credit growth, as substantial capital inflows have created appreciation pressure and the resulting foreign exchange market interventions by the NBS have boosted money market liquidity, which was only insufficiently sterilised.

The current account deficit (CAD) of Serbia has narrowed to 10.2% of GDP, on strong export growth in the first half of the year and subdued import growth despite rising world oil prices. Nevertheless, exports remained at about half of imports in absolute terms. The financial account substantially improved on surging foreign direct investment (FDI) and increased access to foreign loans. FDI surged to 7.7% of GDP, and foreign borrowing, mostly by the private sector, has increased to 7.6% of GDP. Foreign exchange reserves have risen to USD 5.9 billion or 5.2 months of imports. External debt-to-GDP remained high at about 61%. Debt service has increased to 6.6% of GDP and is projected to rise further in coming years.

Approximation to the EU and the WTO accession will require further reforms (incl. privatisation of large public enterprises) and changes in the foreign trade regime (adjustment of import rules, incl. technical standards, quality and sanitary control of goods entering the territory of Serbia).

Relations with International Financial Institutions

After renewing its membership in the IMF in December 2000, the then Federal Republic of Yugoslavia continued to reintegrate into the international community by rejoining the World Bank and the European Bank for Reconstruction and Development (EBRD) in 2001.

The World Bank has been active through the Transitional Support Strategy for Serbia and Montenegro to enhance fiscal sustainability, economic growth and reforms. Since 2001, the EBRD has approved more than 20 new projects, including major infrastructure loans and investments in support of SMEs. Recently, a new EBRD strategy was approved for the country.

An agreement rescheduling the country's $4.5 billion Paris Club government debts was concluded in November 2001; it wrote off 66% of the debt. With the completion of the current IMF programme in early 2006, the second phase of a significant debt relief package provided for by the Paris Club of creditors came into effect, reducing 15% of the net present value of the original external debt amount (equivalent to EUR 600 million). In July 2004 an agreement with London Club was reached on the basis of which 62 % of the $2.8 billion debt was written off.

On 10 July 2006 the Agreement on membership in International Financial Institutions and the distribution of financial assets and liabilities was signed paving the way to Montenegro's accession to the IFIs.

More details on the economic situation can be found in the Candidate and Pre-Accession Countries' Economies Quarterly (CCEQ) published by the European Commission.

Map of Serbia

Source: European Commission