Serbia can boost economic growth to 7% through reforms - World Bank

Serbia can safeguard its hard‐won macroeconomic stability and take its economic transformation to the next level provided it applies reforms to promote growth and build needed resilience for the coming period and beyond, the World Bank said on Wednesday in a report entitled, "Serbia’s New Growth Agenda".

The report outlines seven key areas for urgent and comprehensive action that could make this level of economic growth possible - boosting investment; financing for growing firms; skilling workers; raising productivity; promoting exports; enabling business; unleashing competition.

Increasing public investment to at least 5% of gross domestic product (GDP) and facilitating private investment to above 20% of GDP annually would enhance stability of high growth rates, while supporting credit to the private sector to the level closer to European benchmarks, the World Bank said.

With over two-thirds of firms failing to find workers to implement expansion, improving education to produce skills relevant to the private sector could increase GDP growth rate by up to 1.3 percentage points. Increasing firm‐level productivity and its annual growth from current low levels would enable higher value‐added production, more jobs, and higher wages, while improving infrastructure and removing behind‐the‐border constraints would increase both exports and foreign direct investment (FDI), the bank noted.

A better regulatory framework, including improved predictability and transparency of administrative procedures, could reduce costs for business by 0.9% of GDP annually. Reducing government presence in the economy, especially through less ownership of or favourable treatment of SOEs, would reduce barriers to competition, eliminate distortions, and could save at least 1% of GDP in public funds for more productive use, the World Bank added.