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- GDP (PPP):
- $78.7 billion
- -1.8% growth
- 0.2% 5-year compound annual growth
- $10,405 per capita
- Inflation (CPI):
- FDI Inflow:
Serbia’s economic freedom score is 59.4, making its economy the 95th freest in the 2014 Index. Its score is 0.8 point higher than last year, with improvements in investment freedom, monetary freedom, and freedom from corruption balanced by declines in the control of government spending, fiscal freedom, business freedom, and trade freedom. Serbia is ranked 37th out of 43 countries in the Europe region, and its overall score is below the world and regional averages.
Serbia’s economic freedom was first graded in the 2009 Index, and its score has improved since then by 2.8 points. Four of the 10 economic freedoms, including investment freedom, business freedom, and monetary freedom, have advanced. Most notably, investment freedom has improved by 35 points. These gains, however, have been partially offset by deteriorations in the management of government spending and fiscal freedom.
In the 2014 Index, Serbia has achieved its highest economic freedom score ever. Despite significant progress in a few areas, however, it continues to lag in promoting the effective rule of law. Implementation of deeper institutional reform remains critical.
Serbia signed a Stability and Association Agreement with the European Union in 2008 and formally applied for membership in 2009. Accession talks were contingent on the arrest of wartime leader Ratko Mladic, who was apprehended in May 2011. In March 2012, Serbia was invited to begin the accession process after agreeing to allow Kosovo to attend West Balkan regional meetings. The center-left Socialist Party of Serbia won the July 2012 parliamentary elections, and Prime Minister Ivica Dacic has pledged to continue working toward Euro–Atlantic integration and membership in the World Trade Organization. Serbia’s economy has attracted significant investment in manufacturing and services and has become far more integrated into the international economic system. However, economic growth remains sluggish, and unemployment is a significant problem.
Corruption remains a serious concern. Graft and misconduct are widespread, especially in public procurement and privatization. The government does not have a track record of investigating and prosecuting corruption, especially in high-profile cases. Although reforms in the legal system have been implemented, including a review of all prosecutorial and judicial positions, independence and accountability need to be improved.
The top individual income and corporate tax rates are 15 percent. (The corporate tax was increased from 10 percent to 15 percent beginning in January 2013.) Other taxes include a value-added tax (VAT) and a property tax. The overall tax burden amounts to 35.2 percent of the domestic economy. Public spending is 45 percent of gross domestic income. Government debt is about 64 percent of GDP.
Starting a business takes six procedures, and no minimum capital is required, but obtaining licenses costs over 14 times the level of average annual income. A fully functioning modern labor market has not developed, and the informal sector remains large. In addition to significant subsidies to state-owned enterprises, the government has funded start-up companies in less developed areas of the country, with little to show for it.
Serbia’s average tariff rate is 6.5 percent. Legal barriers to international trade and investment have been reduced. Foreign and domestic investors are treated equally under the law. Reforms involving privatization and consolidation have revived the banking sector. A wide range of credit instruments is available to the private sector, but the level of financial intermediation is relatively low. Capital markets remain small and underdeveloped.