Serbian Post-Crisis Economic Growth and Development Model 2011-2020

Serbia has run out of possibilities and presumptions that served as a basis for development in the previous decade, and the world's economic crisis has worsened the situation, especially in the real sector and employment. The country faced two fundamental macroeconomic imbalances: too rapid growth of private and public consumption relative to GDP and too much reliance on the growth of non-exchangeable goods in the creation of GDP, which increased foreign trade and current payments deficit. The authors of the document propose a new model of economic growth and development that is pro-investment and export-oriented. They believe that the projections until 2020 are optimistic but also realistic and achievable, and that it is the only way to achieve dynamic economic growth that relies on increasing employment and productivity, which also provides internal and external macroeconomic stability and opens the space to increase the living standard on a real basis. The document includes four basic parts, which basically boil down to two: the first part relates to the macroeconomic projections of economic growth, employment, and productivity by 2020, showing in a consistent way how it is possible to achieve an average annual rate of real GDP growth of about 6%, increase in the number of employees for about 440,000, an increase of productivity that increases the international competitiveness of the Serbian economy, doubles the share of exports in GDP, achieves high growth rates of investments, leads to the restructuring of the economy in the direction of exchangeable goods, maintaining the internal and external macroeconomic equilibrium. The second part of the document shows what needs to be done to achieve the desired scenario of growth and development: maintaining appropriate fiscal and monetary policy with financial and public sector reform; employment policies, export orientation, with the restructuring of the economy - reindustrialization, agriculture development, importance of telecommunications and information society development - more even regional development and an emphasis on infrastructure modernization. The authors believe that the proposed model is not only a correct development orientation but also that the proposed development path of Serbia, with respect to all characteristics of the country, is in accordance with the recently adopted strategy "Europe 2020" as a long-term response of the EU to the world economic crisis. The document includes a matrix of activities that defines the concrete measures and activities as well as institutions in charge of their implementation. The authors expect that the Serbian government consider this document and accept it as a basis for the development of a comprehensive development strategy of Serbia until 2020. The economic growth and development in Serbia in the last decade were conducted in an attempt to achieve growth in both personal and public consumption and, on the other hand, through market reforms, privatization, and inflow of foreign investments to create institutional and material conditions for stable development. However, the results achieved in the period 2001-2008 were in the best case very moderate, with an average annual rate of real GDP growth of 5.4% that was insufficient to compensate for a large development gap in the 90's. The unfavorable structure of creation and use of the growing GDP led to increasing exports imbalance due to growing foreign trade and balance of payments deficit. The major components of the economic growth were services. The main conclusion related to the foreign trade imbalance and future economic growth derives from the ratio of growth and participation of exchangeable and non-exchangeable goods in GDP. In 2001, the exchangeable goods (agriculture and manufacturing) participated in the formation of GDP with 32%, and in 2008 the share dropped to below 24%. As a structural phenomenon, this meant the reduced supply of goods for exports and increased demand for imported goods, even regardless of the fact that the international competitiveness of the Serbian economy was reduced. The document emphasizes the need for a new development strategy that focuses on the growth of exchangeable goods, reindustrialization, and the development of agriculture, telecommunications, and information society. The authors believe that this strategy is in accordance with the recently adopted strategy "Europe 2020" and that it is the only way to achieve dynamic economic growth that relies on increasing employment and productivity, which also provides internal and external macroeconomic stability and opens the space to increase the living standard on a real basis.