Economic Progress
Last year was marked with a continuing macroeconomic stabilization, record FDI, and international reform acknowledgements.
Gross Domestic Product
For the third consecutive year, Serbia had one of the Europe’s fastest growing economies with the GDP growth rate estimated at 5.8%. GDP per capita reached $4,028, while the average net monthly salary amounted to €258, partly due to the local currency appreciation against euro. The major growth drivers were telecommunications, construction, and transport with the respective rates of 38.7%, 11.8%, and 11.4%, while industrial production recorded a 4.4% upswing.
An increase in retail trade amounting to 6.5% reflects a rising purchasing power. In 2006, real net average salaries were up by 11.4% against the previous year. In tandem with strong household credit expansion in the banking sector, they fuelled massive local demand and private consumption.
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Inflation Rate
As a result of a restrictive monetary policy, 2006 inflation returned to single digits. On a y-o-y basis, it stood at 6.6%.
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Employment
As a result of the ongoing privatization and company restructuring process, unemployment increased slightly with a total number of unemployed in September 2006 standing at 914,564. The official unemployment rate amounted to 25.9% but the Labor Force Survey conducted in accordance with the International Labor Organization and EUROSTAT practices revealed significantly lower unemployment of 20.8%.
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Foreign Currency Reserves
In the course of 2006, foreign exchange reserves continued to raise reaching $11.52 bn at the end of January 2007. Together with foreign exchange reserves of authorized banks, the country’s overall foreign exchange reserves came to $11.96 bn. With the current reserves covering 12-month imports of goods, the country’s external liquidity and exchange rate stability are further safeguarded.
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Exchange Rate
Massive influx of foreign direct investment in the second half of the year resulted in sharp local currency appreciation. In a period December 2005 - December 2006, nominal RSD/EUR and RSD/USD appreciation amounted to 8.2% and 20.4% respectively.
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Public Finance
Unlike other transition countries, in Serbia public spending was completely covered in 2006. In spite of relatively high public expenditures, the state budget saw 0.7% surplus, providing room for an unprecedented €1.7 bn National Investment Plan.
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Foreign Trade
Total exports maintained an upward trend reaching $6.427 bn by December 2006 or a 43.4% increase against the previous year. Exceptional exports performance was due to the combination of the privatization and restructuring process in a number of industries, ratified free trade agreements with the countries in the region, upsurge in the world prices of a number of goods, and duty-free access to the EU market for food and textile ready-made products. The export/import ratio jumped from 42.8% to 48.8% over the same period, while total imports of $13.172 bn gained 25.9%.
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Foreign Direct Investment
Inward foreign direct investment hit an all-time record high of $4,387 bn stemming mostly from privatization and acquisition deals in telecommunications, banking, insurance and manufacturing industries. The list of leading foreign investors is topped by the mobile phone operators Telenor and Mobilkom, followed by the generic drugs producer Stada, and international banks including the National Bank of Greece, OTP Bank, and San Paolo IMI.
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