2017 Index of Economic Freedom

Serbia

overall score58.9
world rank99
Rule of Law

Property Rights50.3

Government Integrity38.2

Judicial Effectiveness40.2

Government Size

Government Spending40.3

Tax Burden83.3

Fiscal Health46.9

Regulatory Efficiency

Business Freedom62.9

Labor Freedom65.9

Monetary Freedom80.8

Open Markets

Trade Freedom77.8

Investment Freedom70.0

Financial Freedom50.0

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Quick Facts
  • Population:
    • 7.2 million
  • GDP (PPP):
    • $97.5 billion
    • 0.7% growth
    • 0.4% 5-year compound annual growth
    • $13,671 per capita
  • Unemployment:
    • 19.0%
  • Inflation (CPI):
    • 1.4%
  • FDI Inflow:
    • $2.3 billion
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Serbia has implemented significant structural reforms in some parts of its economy. Facilitated by a process involving privatization and consolidation, the once-defunct banking sector has revived and continues to evolve. The economy’s competitiveness is supported by low flat tax rates, relative openness to global trade, and ongoing regulatory reforms.

Despite progress, however, overall economic freedom in Serbia continues to be constrained by the lack of political will to undertake the bold reforms that are required. Inefficient government spending remains high and poorly managed. Deeper institutional reforms are needed to tackle bureaucracy, reduce corruption, and strengthen a judicial system that is vulnerable to political interference.

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Background

Serbia signed a Stability and Association Agreement with the European Union in 2008 and applied for membership in 2009. An agreement between Serbia and Kosovo normalized relations in April 2013. Prime Minister Aleksandar Vucic’s center-right Progressive Party won snap elections in April 2016. Parliamentary elections have been held frequently in Serbia; April’s vote was the third election since 2012. Vucic has been in office since April 2014 and has been accused of silencing critical media outlets and opponents. The government supports seeking membership in the EU, but the country has had difficulty balancing its EU aspirations with its historical ties to Russia.

Rule of LawView Methodology

Property Rights 50.3 Create a Graph using this measurement

Government Integrity 38.2 Create a Graph using this measurement

Judicial Effectiveness 40.2 Create a Graph using this measurement

Serbian citizens and foreign investors enjoy full rights to ownership of private property, but enforcement of those rights can be extremely slow. The judiciary in Serbia operates independently, but endemic problems continue to plague the judicial system. Corruption remains a problem in many sectors, including the security, education, housing, and labor sectors, as well as in privatization processes and the judiciary.

Government SizeView Methodology

The top personal income tax rate is 15 percent, and the corporate tax rate is a flat 15 percent. Other taxes include a value-added tax and a property tax. The overall tax burden equals 35.0 percent of total domestic income. Government spending has amounted to 44.6 percent of total output (GDP) over the past three years, and budget deficits have averaged 5.1 percent of GDP. Public debt is equivalent to 77.4 percent of GDP.

Regulatory EfficiencyView Methodology

Despite some progress in streamlining the process for launching a business, other time-consuming requirements reduce the regulatory system’s efficiency. In an effort to make the labor market more flexible, the government recently introduced amendments to the rigid labor law that was implemented in 2005. The IMF program for Serbia emphasizes rationalization of state-owned enterprises to cut subsidies, but reforms are lagging.

Open MarketsView Methodology

Trade is extremely important to Serbia’s economy; the value of exports and imports taken together equals 105 percent of GDP. The average applied tariff rate is 6.1 percent. Legislation in 2015 liberalized Serbia’s foreign investment climate, but state-owned enterprises distort the economy. Financial intermediation is relatively low, and the percentage of nonperforming loans in banks is one of the highest in the region.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Switzerland81.50.5
2Estonia79.11.9
3Ireland76.7-0.6
4United Kingdom76.40.0
5Georgia763.4
6Luxembourg75.92.0
7The Netherlands75.81.2
8Lithuania75.80.6
9Denmark75.1-0.2
10Sweden74.92.9
11Latvia74.84.4
12Iceland74.41.1
13Finland741.4
14Norway743.2
15Germany73.8-0.6
16Czech Republic73.30.1
17Austria72.30.6
18Macedonia70.73.2
19Armenia70.33.3
20Romania69.74.1
21Poland68.3-1.0
22Kosovo67.96.5
23Bulgaria67.92.0
24Cyprus67.9-0.8
25Belgium67.8-0.6
26Malta67.71.0
27Hungary 65.8-0.2
28Slovakia65.7-0.9
29Turkey65.23.1
30Albania64.4-1.5
31Spain63.6-4.9
32France63.31.0
33Portugal62.6-2.5
34Italy62.51.3
35Montenegro62-2.9
36Bosnia and Herzegovina60.21.6
37Croatia59.40.3
38Slovenia59.2-1.4
39Serbia 58.9-3.2
40Belarus58.69.8
41Moldova580.6
42Russia57.16.5
43Greece551.8
44Ukraine48.11.3
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