Rebalancing Serbia's Economy : Improving Competitiveness, Strengthening the Private Sector, and Creating Jobs

Serbia's economy is out of balance
and performing below its potential. Since the post,
Yugoslavian transition, Serbia's economy has been
running on one engine, the non-tradable sector and expansion
of domestic demand. This was financed with ample capital
inflows, which were sharply reduced since 2008 as the global
economic crisis escalated. While this consumption-led growth
produced some improvements in living standards, it was not
sustainable and created hardly any formal jobs. This
explains why Serbia's job market is also out of
balance. Less than half of the working-age population has a
job at all, and among those that are formally employed,
almost half are employed in the public sector. This note
identifies three priority areas and a set of specific
measures which complement other important reforms,
especially those related to improving the country's
macroeconomic and fiscal position. The reforms will make it
easier to invest, operate a business, and create jobs. The
measures could be implemented within a relatively short
period of time, since many of them build on the existing
initiatives and address well identified problems. Priority
area one, making it easier to operate businesses, by
reducing excessive administrative burdens and making
regulatory environment predictable; priority area two,
making it easier to invest and expand business, by improving
planning and construction permits procedures; and priority
area three, making it viable to create formal sector jobs,
by reducing labor market costs and rigidities.