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UNCTAD Training course on key issues on the international
economic agenda, Belgrade, 18-21 September 2006
Macroeconomic Policies and
Regimes in transition, the
experience of Serbia
Prof. Danica Popović
Faculty of Economics and CLDS
[email protected]
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Mind the gap ...
Exports and Imports GNFS
GMP in FR Yugoslavia, 1960-1996
30
billion USD
20
6.6% ann.gr.
15
stagflation
recovery
10
collapse
5
0
1960 1965 1970 1975 1980 1985 1990 1995
years
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mlrd. $
25
6
5
4
3
2
1
0
-1
-2
-3
-4
1965
imports
exports
resource gap
1970
1975
1980
1985
1990
1995
godine
2
Real GDP Percentage Change Index (1989 = Base), 1989-2004
Poland
EU
Slovenia
Hungary
Slovak
Czech R
Romania
Croatia
Bulgaria
Russia
Serbia
140
120
100
80
60
40
19
89
19
1
90 991
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19
92
19
93
19
1
94 995
19
96
19
97
19
1
98 999
20
00
20
01
20
2
02 003
20
04
3
Time consistency …
In five years of transition, Serbian economic policy passed through five
cycles:





reform cycle 2000-mid 2003;
abandoning reform in mid-2003 and shifting the focus on
issues (to be subsequently given up) of harmonization with the
Montenegrin economy, with partial reversal of its own initial foreign
trade liberalization;
coming into power of a new government (in early
2004),followed by almost nine months of systematic
populist steps; and
a positive breakthrough and announcements of good reform
steps (2005), which resulted from interventions by the IM F, WB
and the EU announcement of the initiation of the SAA process as
of October 2005.
Coming back to populistic policies and national investment
plan
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Overall results
 a rising balance of payments deficit of more than 10
percent of GDP,
 a continuously increasing unemployment rate, which
now stands at 32 percent.
 After four years of transition, GDP is estimated at around
US$ 3,500 in per capita terms (around US$ 5,200 in PPP
terms),
 while slightly less than 11 percent of people in Serbia
still live below the poverty line.
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PRIVATE AND SOCIAL SECTOR
In mid-2005 Serbia
is, explicitly or implicitly,
still subsidizing 75 large
socially owned loss-making
companies, which employ
around 150,000 workers.
In addition, the government
is adamantly keeping
control over public
enterprises and public
utilities (600,000
employees), which gives
a totalof around 40
percent of registered
labor.
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Transition is all about structural
changes
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Transition in the 90ties?
 Statistical tests indicate that the structure of
employment by sector has not changed significantly,
and thus labor is neither “moving” to propulsive
sectors, nor leaving those declining ones.
 The Lillien measure (calculated as a standard
deviation of annual sectoral employment growth
rates) for the first four years of transition in Serbia
amounts to 3.9 percent.
 Lillien coefficient for the Czech Republic amounted to
20.9 percent, for Poland to 20.3 percent, for Slovakia
to 14 percent, for Hungary to 9 percent, etc.
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Inflation and exchange rate
120
112
110
100
90
79 86
80
68
61
70
59
60
58 59
50
41
41
40
30
17
15
13.7
20
8
16 21
10
0
1998 1999 2000 2001 2002 2003 2004 2005 2006
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inflacija
dinar/evro
13
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Reforms of the pension system,
health care system and public
administration strongly encroach on
the acquired rights, and for that
reason a strong political will and a
consensus (reached at least in
principle)
between the government, employers
and trade unions, are necessary for
their implementation.
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PRIVATIZATION METHODS
 political parties which are running state companies
will become losers, hence every announcement of
such a possibility provokes an immediate response
from party officials, offering an explanation that such
solutions are “bad for the country”, whatever that may
mean.
 Experiences show that after privatization, the services
of these companies, as a rule, become much better,
costs lower and the political influence of new owners,
in a good regulatory framework, is much weaker than
the influence of political parties which acquire the
management rights without investing a single dinar in
it and, by rule, without adequate management
capacities
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HUMAN CAPITAL OUTFLOW
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the golden rule - productivity growth has to be at least
equal to the sum of real appreciation and real wage
growth.
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