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Transition Policies
The transition of the economy of Serbia began under very difficult economic and social conditions. These conditions were the result of a decade of regional conflicts that followed the break-up of Socialist Federal Republic of Yugoslavia in 1991. By 2000, recorded per capita GDP was less than half of its 1989 level, external debt exceeded 130 percent of GDP, and annual inflation was over 140 percent.

The new governments of Serbia proclaimed joining European Union as the major long term goal. It began to stabilize and transform the economy by tightening macro-economic policies and recommencing market-oriented structural reforms, combining own efforts with the support of the international community and international financial organizations.

Substantial progress has been made in almost all areas. For the past few years, business climate in Serbia has changed favorably and thoroughly. The inflation has been brought down from nearly 150 percent in 2000 to single digit rate in 2004.

Followed by growth of the economy of about 5% per annum, and changing ownership structure due to privatization, Serbia is recognized as a true growing market economy. EBRD has marked Serbia's business environment as 14th out of 27 assessed countries, whereas the transition process was marked as 3+ out of 4.

In July 2004, Government reached an agreement with the London Club of commercial creditors to write-off 62% of the Serbia's debt, while the debt to Paris Club was earlier reduced by 66%. These agreements decreased the debt burden of the country and stimulated foreign trade. All this indicates that Serbia is becoming a more stabile economy with a capacity to successfully attract foreign investments and facilitate faster integration into the world economy.

Having achieved macroeconomic stability, stability of the currency and having begun the changes of the legal environment, Serbia has become one of the most attractive locations for FDI in the region. In 2003 Serbia attracted about 1.3 billion Euro of FDI and about 900 million in 2004. what indicates that confidence of investors in is growing.

The investors are attracted to Serbia for many reasons. However, the main reasons are that they can experience growth through accessing new markets, reducing costs and being able to operate more efficiently in general. Serbia has the lowest corporate tax rate in the region, the highest literacy in English language in Central and SEE, as well as the most competitive labor costs.

Geographical location makes Serbia a natural gateway to the East and South East of Europe. It is positioned at the intersection of Pan European Corridors No.10 and No.7, while Danube, the biggest water way, is passing through Serbia with the length of 580 km. Today, with an enlarged EU and with the coming creation of the South East Europe Free Trade Area, investors will have a great possibility to, by establishing businesses in Serbia, reach a market of 50 million people in South East Europe. In addition, Serbia is the only country outside CIS that has a Free Trade Agreement with the 150 million people Russian market. These are just some of the reasons why Serbia is seen as the logical link between South East, Central and Western Europe and the land of rising opportunity.

Print version
Economy of Serbia
Article from Economist
Transition Policies
Business Environment
Financial Sector
Privatization/Enterprise Reform
Serbia Investment and Export Promotion Agency