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- GDP (PPP):
- $95.5 billion
- -1.8% growth
- 0.3% 5-year compound annual growth
- $13,329 per capita
- Inflation (CPI):
- FDI Inflow:
Serbia has undertaken notable institutional and policy reforms. A competitively low flat corporate tax rate and relative openness to global trade have eased its ongoing transition to a market economy. New bankruptcy and labor laws intended to improve regulatory efficiency have been implemented.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 62.1 (up 2.1 points)
- Economic Freedom Status: Moderately Free
- Global Ranking: 77th
- Regional Ranking: 33rd in Europe
- Notable Successes: Trade Freedom and Fiscal Freedom
- Concerns: Rule of Law and Management of Public Finance
- Overall Score Change Since 2012: +4.1
Inefficient government spending continues to undercut private-sector dynamism. Loss-making state-owned enterprises, particularly in transportation and energy, have been the main recipients of budget support in past years. Greater efforts are needed to tackle bureaucracy, reduce corruption, and strengthen a judicial system that is vulnerable to political interference.
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. The center-right Progressive Party won the early parliamentary elections in March 2014, making Aleksandar Vucic prime minister. Balkan floods severely affected Serbian infrastructure in 2014 and led to an economic contraction. The economy is expected to grow very modestly in 2015. Vucic continues to reform the budget and move toward an increasingly privatized economy. Serbia’s efforts to balance its EU aspirations with its historical ties to Russia are proving to be increasingly difficult. The Serbian economy has attracted significant investment in manufacturing and services as it has integrated into the international economic system, but high unemployment is a significant problem.
Corruption remains a serious concern, and implementation of anti-corruption legislation is relatively weak. The government has made some progress in increasing competency, transparency, and accountability in public procurement and public administration. The government’s 2013–2018 judicial reform strategy aims to strengthen the High Judicial and State Prosecutorial Councils. Enforcement of property rights can be extremely slow.
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 33.4 percent of total domestic income. Government spending amounts to 43.2 percent of GDP. The budget continues to run a deficit, and public debt now equals over 70 percent of annual output.
The business start-up process does not require minimum capital and takes only six procedures. Obtaining licenses costs over 10 times the average level of annual income. An efficiently functioning modern labor market has not fully developed, and the informal sector remains significant. The government has reduced subsidies and has launched a reform of inefficient and loss-making state-owned enterprises to curb the need for state aid.
Serbia’s average tariff rate is 6.1 percent. State-owned enterprises are active in several sectors of the economy. Domestic and foreign investors are generally treated equally under the law. The government may not expropriate property without providing compensation. Reforms involving privatization and consolidation have revived the once-defunct banking sector. Non-performing loans continue to be numerous, accounting for over 20 percent of total loans.