Serbia has passed through a period of dramatic change during the previous fifteen years. However, this did not reflect fully on economic growth since the impact of the international financial crisis and numerous rounds of elections have slowed down necessary structural reforms in the country and led to a loose fiscal policy until 2014. More recently, there has been a greater fiscal responsibility and a reengagement on critical issues such as state owned enterprise reform, public administration reform, and public sector efficiency. In January 2014, Serbia started membership talks with the European Union (EU) after making significant progress in negotiations with Pristina, Kosovo. 

Serbia has pursued these reforms while struggling to recover from the impact of the international financial crisis - which led to a 50% spike in poverty and a similar jump in unemployment in the country. As in many countries, the challenge in Serbia is translating a tenuous economic recovery into jobs and poverty reduction in a tight fiscal environment. As a result, Serbia needs to become more competitive and increase productivity in the country.

The Systematic Country Diagnostic, a comprehensive assessment carried out by the World Bank, identified six fundamental priorities as having the greatest potential impact on growth and poverty reduction in Serbia and for achieving greater shared prosperity across the society. These six priorities are:

  • Restore fiscal sustainability, and maintain macroeconomic and financial stability;
  • Improve governance and institutional capacity to implement and monitor reforms;
  • Make the public sector more efficient by privatizing commercially oriented enterprises, restructuring large public utilities, and rightsizing the public sector;
  • Improve the business climate by creating an environment conductive to private sector-led investment, growth, and job creation;
  • Enhance the quality of public infrastructure to better support international, regional and domestic connectivity;
  • Strengthen the labor market institutions to facilitate formal employment and create earnings opportunities for the less well-off.

Growth in Serbia for 2015 is projected at 0.5%, a small but important recovery of economy after a severe impact of floods in 2014 which led to a decline of economy of 1.8% in 2014. More robust growth rates of around 2-3% are forecasted over the medium term.

Serbia’s per-capita Gross Domestic Product (GDP) was approximately $6,181 in 2014. Poverty went up after the crisis and during the recessions of 2012 and 2014, mainly due to losses in employment and labor income. Using the standardized regional moderate poverty line of $5/day in 2005 PPP, the poverty rate peaked at 15.1 percent in 2010. After falling in 2011, poverty rose slightly again in 2012 and 2014 to an estimated 14.8 percent and 14.5 percent, respectively. Growing unemployment led to a record high unemployment rate of 25.5% in April 2012, which gradually decreased over the recent years to reach 17.9 percent in June 2015.

Serbia’s main exports are cars and other products from the automotive sector. Automotive exports have become the most important sector following significant investments from Italian carmaker FIAT. Almost 90% of all Serbian exports go to Europe—55% to the EU and about 33% to the Central European Free Trade Agreement (CEFTA) region. Exports of services are also gaining in importance, reaching 11.5% of GDP in 2014.

Going forward, Serbia’s main challenge is to improve living standards in the country and transform economic recovery into jobs in a tight fiscal environment. Increasing exports, productivity, and competitiveness are recommended actions that can help propel the country’s economic growth.

The World Bank Group’s programs in Serbia are designed to advance a competitive and inclusive economy and, through this, to promote integration into the European Union. .

Serbia’s Country Partnership Framework (CPF) FY 2016-2020 was approved by the World Bank in June 2015. The CPF supports Serbia’s reforms in key areas that can help Serbia maintain macroeconomic stability, create better conditions for private sector growth and job creation, improve infrastructure, and provide better public services for its citizens.

The CPF has been developed under a new World Bank Group approach to country engagement and through extensive consultations with the government, private sector and business associations, development partners, civil society, and beneficiaries across the country. The focus of the CPF is on:

  • Economic governance and the role of the state. The World Bank Group program in this area will address constraints to the effectiveness of economic governance: the size and management of the budget, public administration capacity to implement reforms and deliver services, the footprint of the state in the economy, the efficiency and performance of public utilities and transport companies.
  • Private sector growth and economic inclusion. The program will focus on addressing key constraints that hinder private sector development and economic inclusion, such as strengthening the banking system, improving land management, improving infrastructure networks, increasing renewable energy capacity, developing better skills and reducing barriers to labor market entry.

In September 2015, the portfolio consisted of eight active investment projects for a total of US$ 1,181 million, and two trust funds in the amount of US$20.66 million. The CPF proposes a World Bank lending program of up to US$1.6 billion and International Finance Corporation (IFC) financing of up to US$600 million.

IFC’s committed investment portfolio in Serbia as of 30 June 2015 is $387.4 million. In fiscal year 2015, IFC invested $19 million in Serbia. IFC works with private sector clients, government, and civil society to bring the benefit of global expertise to the country through its advisory services and investment projects.

IFC’s priorities in Serbia include agribusiness, climate change, and improvements in the investment climate. IFC is also focusing its investment services on increasing access to finance by supporting the development of local financial institutions, especially those that concentrate on SMEs.

The World Bank began supporting Serbia in 2001 as part of the Federal Republic of Yugoslavia, and since 2006 as an independent country. From 2001 to date, the World Bank has financed 39 projects with almost $2 billion.

The Bank’s knowledge and financial support has played a critical role in reforming Serbia’s banking, education, energy, public finance and social sectors. It was instrumental in the privatization of a number of state and socially owned companies. It also assisted in the modernization of border crossings, reform of the judiciary, road rehabilitation, improving environment, health and employment services, and helped Serbia develop a more effective business environment.

The World Bank is supporting Serbia in its progress toward full European integration and the promotion of dynamic economic growth through the accelerated implementation of economic reforms, increasing employment and living standards, and balanced regional development.

The Bank’s current portfolio consists of three active investment loans with a total  commitment value of $508.9 million. Highlights of the Bank’s portfolio include:

Corridor X Highway Project
Serbia’s geographic position puts it at the crossroads of the two important Pan-European transport infrastructure networks. One is connecting Budapest with the Bulgarian capital Sofia; the other links Greece to the north. This network is known as Corridor X, and currently not all sections in Serbia are of Motorway Standard. To improve this corridor, the Government asked the World Bank to act as a lead partner and make a contribution of $388 million, the largest ever World Bank loan to Serbia.

Serbia Health Additional Financing Project
Improving efficiency remains the main challenge facing Serbia's health sector. As in other European countries, changing the way healthcare providers are paid is crucial. A $13.5 million loan from the World Bank has allowed communications and technology equipment to be updated in 20 hospitals around Serbia. Moving to a Diagnosis Related Groups (DRG) system has enabled more efficient financing of public health care providers, and ensures quality and access to public health care services. The Ministry of Health, Health Insurance Fund and other key national partners have initiated the implementation of reforms to move toward payment systems that reward productivity and quality, ultimately leading to more efficient public spending.

In February 2014 the Board of World Bank Directors approved a new loan of $40 million for the Second Serbia Health Project,aimed at supporting the improvement of health care financing and efficient purchasing of pharmaceuticals and medical products

Reports from Serbian hospitals are promising, showing that a reduced number of hospital beds achieve higher occupancy rates and a shorter average length of stay.

Deposit Insurance Strengthening Project

The Deposit Insurance Strengthening Project aims to strengthen the financial and institutional capacity of the Deposit Insurance Agency (DIA), to ensure that the Deposit Insurance Fund has the resources to meet its legally mandated deposit insurance and bank resolution functions. The Deposit Insurance Fund covers depositors in Serbia of up to 50,000 Euros in the case of a bank failure. The depletion of the Deposit Insurance Fund due to several recent bank failures has created risks to the Serbian financial system - due to the possibility of it not having adequate resources to cover insured depositors.

Ensuring confidence and continuing to develop the financial sector in Serbia is a critical part of the agenda of ensuring shared prosperity in Serbia. Access to credit remains a major issue in Serbia, as credit growth continues to be much lower now than prior to the 2008 global financial crisis. Research has shown that increasing confidence in a financial system can lead to an increase in the amount of domestic savings that can be mobilized for more productive uses, which, in turn, can lead to increased growth and job creation.

Significant support is also provided to strengthen the institutional and technical capacity of the Deposit Insurance Agency.


Serbia: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments