Nikolay Georgiev Dushan Nedeljkovic

Outline Country Facts Trends of macroeconomic aggregates Economic activity Indicators Labor Market Trade FDI Monetary policy and Exchange Rate Wages

Country Facts Territory – sq km Population – 7.4 million Capital – Belgrade Currency – Dinar (RSD) Official Language – Serbian Major Economic and Political Reforms – 2000 Natural resources – oil, gas, coal, iron ore, copper, zinc, gold, silver, magnesium, limestone, marble, salt, arable land

Trends of macroeconomic aggregates Average GDP growth for the period is 6.1% Increase in aggregate demand High investment and Structural Reforms Higher productivity and increased efficiency due to privatization Positive financial results of RSD 108 billion in 2006 Still recovering from the slump in 1990s

Economic activity Indicators

Labor Market In the period employment level falls Increase in the employment in the private sector but downsizing of the Stated-owned enterprises Unemployment remained high (around 21%) but decreases in 2007 and % and 14.7% respectively

Trade Major trade partners – Austria, Russia, Germany, Italy, Bosnia, Romania, Bulgaria Main imports are fuel, capital goods and transport equipment, main exports – manufacturing goods, food, transport equipment, machinery In the period exports increased dramatically due to increase of aggregate demand. Imports grew even faster due to the same reason plus the effect of the appreciation of the RSD Trade deficit increase from 20.8% of the GDP in 2005 to 22.8% of the GDP in 2007 CA deficit also increased from 10.0% of the GDP in 2005 to 14.7% of the GDP in 2007

Foreign Direct Investment In the period Serbia’s capital balance increased significantly due to the great amount of FDI – EUR 6.3 billions In 2008 – decrease in FDI

Monetary policy and Exchange Rate Due to the high inflation the NBS had to impose restrictive monetary policy in the period The dinar euro XR increased in real terms by 20.5% As a result in 2008 inflation was 6.8%

Wages Average net wages grew in the period 2001 – 2008 reaching 32,746 RSD (EUR 347) in Wage growth, especially in the public sector, combined with local currency appreciation, brought about to an increase of unit costs of labor and lower competitiveness of the economy.