The Economy and Infrastructure of Serbia

Serbia has been struggling since the 1990’s to regain their economy and bring it to where Hungary and other Eastern European countries are today. The country’s Economic Freedom ranking, after improving during 2011-2016, declined in 2017 due to weak fiscal prudence and a lack of reforms to improve bureaucratic structure. This set Serbia amongst the lowest five in 2017.

That being said, the weak rule of law increases corruption opportunities in the country. Serbia’s corruption performance ranking in 2016 was better than the one in 2011, owing to adoption of the National Anti-Corruption Strategy (AC Strategy) of the Republic of Serbia for the period 2013-2018 that outlines the measures and way forward to tackle corruption in the country.

Serbia’s total tax rate has increased between 2011 and 2017 and was higher than peers like Bulgaria and Croatia. Businesses can avail a ten year tax holiday subject to certain conditions and provided they have invested at least RSD1.0 billion on property, plant and equipment (trade sources). In the World Bank’s Regulatory Quality Index ranking 2015 (latest data available), Serbia’s ranking was in the bottom ten regionally, owing to bureaucratic delays and poor rule of law that weakens business confidence.

Overall, Serbia’s transport infrastructure remains poorly developed and needs attention.  The country’s Logistics Performance Index ranking, after improving during the 2011 and 2015 period, declined in 2016 owing to a decline in the quality of logistic services and trade infrastructure. Regionally it was placed in the middle. The country’s logistic competitiveness is expected to get boosted by the opening of its first private train terminal in 2017.Also, Serbian state-run railway infrastructure operator Infrastruktura Zeleznice Srbije plans to increase investments for construction and maintenance activities to €640 million euro (US$670 million) in 2017 from €215 million euro in 2016.

With infrastructure on the rise, so is the internet. A rise of more than 30 percentage points seen in households having access to broadband penetration between 2011 and 2016 means that internet accessibility is spreading rapidly within the country. Though despite the increase, broadband accessibility remains lower than most of its peers within the region; Internet usage among businesses in Serbia is very high, but receiving orders over the internet remains very low, possibly owing to high mobile and fixed internet tariffs.

Schooling is still a problem within Serbia as the average duration of schooling in Serbia for 2016 was 12.0 years. While this is slightly higher than 11.5 years of average schooling prevalent in Eastern Europe, brain drain is becoming a serious problem. This is when highly trained or intelligent people emigrate. This is a key problem for the country going forward as could create wide scale labour shortages in the country. This is impart due to the sub-standard education and skills not needed by the industry people have skills for. Serbia’s labour market remains rigid as low co-operation exists between employer and labour and its capacity to retain and attract talent remains weak. Although both overall and youth unemployment rates declined during 2011 and 2016, they remained much higher than the regional average as well as that of peer nations. The country’s National Youth Strategy 2015-2025 amongst other objectives also aims at not only creating more employment but also improve employability of the country’s youth.

Overall, Serbia’s economy and government has been improving over the years. Yet, they have had a stagnation as their new policies are coming into play. The country will have to continue improving the education system as well as the job market to curb their problem with brain drain. The Serbian train infrastructure improvements, as well as internet and bandwidth, leave the country to soon be thriving in these areas. With the help of the National Anti-Corruption Strategy of the Republic of Serbia, the government should become more effective and help the country flourish.