Serbia Country Report

The anti-government protests centralised in Serbia’s capital Belgrade from the end of 2018 and the beginning of 2019 have increased the risk of a snap election in 2019. The lack of organised opposition, however, makes it unlikely that a snap election would produce a radically different outcome from the current situation. Currently, the ruling coalition led by the Serbian Progressive Party (SNS) enjoys a parliamentary majority, while the popularity of President and SNS leader Aleksandar Vučić s likely to remain unparalleled in Serbia's political scene. The government's actions continue to be governed by the objective of achieving EU membership with some steps made in improving the business environment and the labour market. However, Serbia is still to achieve significant progress in strengthening the public administration, judiciary independence, state-owned enterprises governance and the anti-corruption framework. EU membership would also require normalisation of relations with Kosovo, with Serbia refusing to recognise Kosovo's independence. EU membership is unlikely before 2026.We forecast GDP growth at 3.6% in 2019 and 2020. Domestic demand will remain the main growth driver in 2019–20, supported by improvements in the labour market, rising wages, including an increase of the minimum wage by 9% as of January 2019, a reversal of crisis-era pension cuts, and the increased availability of consumer credit. Investment is forecast to contribute to growth as credit availability improves amid falling non-performing loans, the low interest rate environment, and inflows of foreign direct investment. The main risks to our forecast include a slowdown in the euroarea, Serbia’s main export partner, and an escalation in regional trade protectionism, after Kosovo imposed 100% tariffs on all goods imports from Serbia in November 2018.