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Serbia should strengthen rule of law, fight corruption, boost investment - EBRD

Author Iskra Pavlova
Serbia should strengthen rule of law, fight corruption, boost investment - EBRD Photo: EBRD

BELGRADE (Serbia), November 19 (SeeNews) - Serbia needs to systematically address the institutional causes of its chronically weak growth, focusing on strengthening the rule of law, fighting corruption and increasing domestic private and public investment, the European Bank for Reconstruction and Development (EBRD) said on Tuesday.

Serbia's average economic growth was just 1.7% between 2010 and 2018, which is significantly below that of its regional peers, EBRD said in its Transition Report 2019-2020.

"The governance of state-owned enterprises (SOEs) and public projects needs to be improved. The government should focus on improving the efficiency of large SOEs, also through necessary legal changes and/or stronger implementation of existing legislation," the report said. "A single pipeline for all public projects should be developed, enabling proper cost-benefit assessment and monitoring while project implementation should be strengthened further."

The EBRD also said that the reform of the public administration need to be high on the agenda, and planned measures such as the introduction of a new public-sector pay grade system, and the professionalisation and de-politicisation of the public administration should be implemented without further delay.

The bank expects Serbia's economic growth to moderate to 3.2% this year from the robust 4.4% in 2018, primarily reflecting the stagnation in the agricultural sector and a fall in industrial production.

EBRD also said that the foreign direct investment (FDI) inflows have been strong in the past few years, helping to cover Serbia'sgrowing current account deficit. 

"Nevertheless, the structure of FDI has changed to more labour-intensive projects, requiring low-skilled labour and supported by high subsidies," the report stressed.

On the other hand, the banking sector's non-performing loans (NPLs) have continued to decline, dropping to 4.9% at end-August, mainly due to mandatory write-offs, but the financial sector remains highly euroised, with a rate close to 70% at end-August.