Serbia and the EU

Economy and Finance DepartmentEconomy and Finance Department

Government of the Republic of Serbia – Office of the Deputy Prime MinisterGovernment of the Republic of Serbia – Office of the Deputy Prime Minister

Serbia and the EU

Božidar DjelićDeputy Prime Minister of Serbia

Hellenic Foundation for European and Foreign Policy (ELIAMEP) Athens, March 31st, 2008

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SUMMARY

Major achievements in 2007 and the European Agenda for 2008

Macroeconomic stability and growth Numerous opportunities in strategic sectors

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The European Integration process has been the major challenge for Serbia since 2001

Serbia started the SAA negotiations in October 2005 and successfully completed them in September 2007. The SAA was initialed on November 7th, 2007 in Brussels

Since 2001 Serbia has been actively working on the harmonization of its legislation with the acquis communaitaire. The Government is now in the final stage of preparing the National Program of Integration

The overall speed of the integration process is primarily determined by the political constellation

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The European Integration process has been the major challenge for Serbia since 2001

Political requirements, besides the full cooperation with the ICTY, include long-term political and economic stability of the country

The unilateral declaration of independence of Kosovo has further complicated the bilateral relations between Serbia and some EU member states

Serbia must remain committed to its European future for it not only ensures its long-term success in all areas, but it is the best chance we have to preserve our sovereignty and territorial integrity in Kosovo and Metohija

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The Government has continued Serbia’s European Integration process:

The EU Justice, Liberty and Security Mission identified key priorities and tasks in the process of judiciary and security reforms; the preliminary report will be presented on April 4th in Belgrade

Serbia continued the dialogue on full visa liberalization and the third round of talks is to be held in April in Brussels

The issuing of new biometric Serbian passports is scheduled to commence in the end of April

The plenary session of the Enhanced Permanent Dialogue with the European Commission will be held on April 4th in Belgrade

The IPA 2007 Financing Agreement is to be signed in the beginning of April 2008

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Serbia needs a clear and unequivocal support of the EU

Acceleration of the visa liberalization process – presentation of the roadmap by the end of April and the abolishment of visa regime for Serbian citizens by the end of 2008 at the latest

Signing of the SAA as soon as possible – Serbia has full administrative capacities for the SAA implementation; laws needed for the implementation are awaiting ratification by the new Parliament

Granting Serbia the candidate status by the end 2008 Financial assistance for Serbia has been increased – current

assistance under the IPA mechanism amounts to EUR 190 million annually for the period 2007-2011

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Macroeconomic stability and growthGDP GDP growth is the highest in the region An average growth for 2001 – 2006 period is 5.3 %

Real GDP growth 2007*

7.3

5.8 5.6 5.6 5.5 5.54.6

1.8

6.0

0

2

4

6

8

10

Serbia Montenegro Romania Croatia Slovenia BiH Bulgaria Macedonia Hungary

Source: National Statistics Office* Estimation

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Macroeconomic stability and growthInflation The inflation rate is stabilizing after 2001 The inflation in 2007 was result of supply side shocks: oil price, drought…

Inflation

14.8

7.8

13.717.7

6.610.1

40.7

0

10

20

30

40

50

2001 2002 2003 2004 2005 2006 2007

Source: National Statistics Office

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Macroeconomic stability and growth Foreign trade Export growth rates are among the highest within the transition countries Foreign trade deficit amounts to € 6.9 bil. in 2007 (22.8% of GDP) due to huge imports

of capital and intermediate goods (€ 8.3 bil.)

Average export growth rates over the period 2001-2006

26.0 25.623.9 23.2 23.8

22.2 22.921.1

0

5

10

15

20

25

30

Lithuania Serbia Slovakia Poland Armenia Czech Bosnia andHerzegovina

Romania

Source: UNCTAD

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Macroeconomic stability and growthForeign direct investment

Significant increase in FDI has been recorded since 2001 According to preliminary results FDI in 2007 were mostly greenfield ($2 bil.)

Source: National Bank of Serbia* Preliminary results

FDI inflow, in $ milllions

165475

1,360966

1,550

3,100

5,474

0

1,000

2,000

3,000

4,000

5,000

6,000

2001 2002 2003 2004 2005 2006 2007*

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Macroeconomic stability and growthForeign debt With foreign debt of 57.2 % of GDP in 2007, Serbia is ranked among moderately indebted countries

Source: National Bank of Serbia, Ministry of Finance and National Statistics Office* Estimation

Foreign debt, % GDP

70.9 66.757.5 59.0 58.9 57.2

94.2

0

20

40

60

80

100

120

2001 2002 2003 2004 2005 2006 2007*

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Macroeconomic stability and growthPublic debt Public debt decreased in 2006 and in 2007 fell well below Maastricht criteria (60 %)

Source: Ministry of Finance* Estimation

Public debt, % GDP

102.2

69.564.3

53.3 50.2

34.929.5

0

20

40

60

80

100

120

2001 2002 2003 2004 2005 2006 2007*

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Macroeconomic stability and growthForeign currency reserves Foreign currency reserves reached a record level in 2007 Foreign reserves/imports of goods and services ratio was 8.3 in 2007, the highest in the region

Source: National Bank of Serbia

Foreign reserves of the NBS in USD million

1,1692,280

3,5504,245

5,843

11,888

14,216

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2001 2002 2003 2004 2005 2006 2007

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Numerous opportunities in strategic sectorsAdequate framework

Ongoing harmonization with the EU Acquis Sector specific legislation, property legislation, etc

Corporate income tax rate – 10 % Personal income tax rate – 12 % 10-year tax holiday for large investments Subsidies for hiring new employees Tax credit for investing in fixed assets

Up to 80 % of the investment amount Accelerated depreciation

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Numerous opportunities in strategic sectorsFramework or new schemes underway IPO strategy, legal framework and pilot projects envisaged for 2008 PPP law and pilot projects envisaged for 2008 Investments in infrastructure - € 3 to 5 bil. per year (Belgrade by-pass,

Highway Nis-Bulgarian border, Highway Leskovac-Pancevo and the Pancevo Bridge, Corridor X, Highway Horgos-Pozega)

Energy sector - € 2 bil. (Construction of power plants Kolubara B, TENT (700 MW) lignite fired TPP and Novi Sad cogeneration capacity)

IPO for EPS envisaged for 2010 Air transport (Privatization of JAT Airways, JAT Tehnika, Cargo center

construction, and IPO for Belgrade Airport envisaged for 2009) Telecommunications (IPO for Telekom Srbija is envisaged for 2008)



Thank you !

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Serbia and the EU