Can Serbia’s Improving Economy Last?

The Danube River as it moves through Serbia. Photo by Falco. Licensed under Creative Commons CC0 License.

After nearly two decades of ethnic and religious strife, Serbians had some reason for optimism in October 2006 when nearly four million Serbs went to the polls to approve a new constitution. The new constitution was contentious in its treatment of Kosovo, which later formally broke from Serbia, but marked a new ear for Serbs as it became a stand-alone country for the first time after Montenegro separated earlier in the year. Despite some positive developments, Serbs are still waiting for the validation of their optimism eleven years later.

Serbia isn’t a wealthy country and never has been since the break-up of Yugoslavia. But, the situation after Prime Minister Aleksandar Vučić took control of the government after his Progressive Party won 2014 elections, constituted an emergency. Serbia’s budget deficit exceeded 6% of GDP in 2014, deteriorating almost every year after the global financial crisis of 2008 when it was 1.7%, leaving few options besides a program of severe austerity. Vučić also embarked on a privatization program of state-owned companies and an expansion of the private sector. 

The majority of residents couldn’t feel much benefit in their own lives after the Serbian government embarked upon its plans of structural change. This year, in April of 2017, Aleksandar Vučić decided to take a part in the candidacy for the next president. The previous president before Mr. Vučić won the elections this year was Tomislav Nikolić. Although they have both been members of the same Party (the Progressive Party), they have had sharp disagreements on the future of Serbia.

Let’s take a look at Serbia’s export statistics to understand better how things actually changed. When talking about the export economy, we can see that Serbia is 56th in the world, with nearly $15 billion of exports each year. Autos lead Serbian exports, with $1.23B each year. Right after autos are Insulated Wire ($664M) and Rubber Tires ($432M). Additionally, Serbia exports Electric Motors ($387M) and Corn ($371M). It may be a little bit surprising seeing the corn last on the list. How is that possible? Serbia is a fertile land with so many farmers, as is the case throughout the Balkans.

Although Serbia borders Albania, Bulgaria, Croatia, Bosnia and Hercegovina, Hungary, Macedonia and Kosovo, its trading wasn’t still with these countries. What were then the top destinations for the export? Italy ($2.17B), with about 15% of Serbia’s exports. Germany is right after that with $1.94B

How successful have Aleksandar Vučić’s programs been? Third quarter GDP expanded by 2.1%, the fastest growth since a year ago, while industrial production also expanded. Unemployment peaked in 2012 at 23.9% and is now well down at about 16%. Despite the cyclical bounce, Serbia’s population remains in decline. Between 2012 and 2017, the population receeded from 7.2 million to 7.0 million people. In what is known as “the white plague” – the Balkan term for shrinking population – about 45,000 more Serbians die or leave the country each year than are being born. That is the equivalent to a Serbian town disappearing each year.

It is not just a low birth rate that is the culprit. Many Serbs have moved away to central Europe, Scandinavia, the United States, and Canada. Since borders opened up in the early 1990s, at least 4% of the Serbian population have left. “A critical mass of my generation have gone to the West for a better standard of living,” said a 42-year-old Belgrade resident. “They were supposed to drive this country forward but have left and now have their children elsewhere.”

The saddest thing is that young people continue to leave. Young people that are well-educated but cannot find a job. They don’t have a chance here, they search for something better.

What is going on in this country lately is quite confusing. The statistics seem optimistic on the surface, but is it merely a cyclical bounce masking neglected structural problems? For years, Serbian policy has been geared towards gaining accession to the European Union. That has included acceeding to the demands of the International Court of Justice in The Hague as well as modifying fiscal policy to eliminate fiscal deficits.

Serbia is now poised to become an E.U. member. Free trade and immigration are hoped to push the average salary of a Serb higher than the current $5,000 (at PPP) currently enjoyed. Will it? Only time can tell.

About the Author:

My name is Dragana Drobnjak and I was born in Belgrade, the capital city of Serbia. I am 26 years old and have graduated from the Faculty of Philosophy in Novi Sad and earned a Bachelor’s degree in Pedagogy. Pedagogy is the discipline which deals with the theory and also the practice of teaching. It deals with the question:”What a human being needs to become?” I have lived in Serbia basically all my life, although I moved to Croatia when I was 12 years old, and lived there for 6 years. My hobbies are writing, sports, philosophy, science, music, nutrition, and health.



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