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Serbia 2009
Economic outlook and
perspectives
Lisbon, July 2nd 2009
Vesna Arsic
State Secretary
SERBIA – The Heart of SEE
Located in the very heart of
SEE region, at the crossroads
of 2 Pan-European
transportation axes-corridors
X and VII.
Clearly determined to
become leader in the region –
“The Balkan Tiger”
ENHANCED INVESTMENT AND POLITICAL STABILITY
 The SAA with the EU signed in April 2008; membership candidacy planned
for 2009/2010; accession preparations to be over by 2012
 Serbia’s application for the WTO accepted; accession planned for
2009/2010
 Credit rating:
- Standard & Poor's: BB- Fitch: BB PwC EM20 Index–Serbia as the 3rd most attractive manufacturing and 7th
Shared Services location among emerging markets
 E&Y European Investment Monitor–over 100 new projects in Serbia in
2007, 2008; Serbia ranked 2nd in South East Europe
Top Five Manufacturing
Destinations in the World
 Serbia is ranked 3rd
Source: The PricewaterhouseCoopers EM20 Index, July 2008
SEE – The most Attractive Region in Europe for
Manufacturing activities
Which region is the most attractive for manufacturing activities?
SEE 38% in 2008 Vs. 32% in 2007
Source: Ernst & Young Southeast Europe, Attractiveness Survey 2008, 216 International executives
SEE – Clear leadership on costs and
productivity
Which region in Europe is most attractive in terms of labour and productivity?
Flexibility of labour
legislation
Labour cost
Productivity increase
49%
36%
33%
14%
149
2
Central
Europe
10%
3
Southeast
Europe
Russia
Ukraine
Belarus
15%
2
Western
Europe
1
Southeast
Europe
13%
18%
2
3
Central
Europe
Western
Europe
Source: Ernst & Young Southeast Europe Attractiveness Survey 2008 – 216 international executives
16%
1
Southeast
Europe
3
Central
Europe
Serbia and SE Europe
Net FDI Inflow in SE Europe 2000-2007
mln Euros
Foreign Direct Investments in Serbia:
2000 – 2008 (mln US $)
5,000
4,350
4,500
4,000
3,460
3,500
2,994
3,000
2,500
2,000
1,616
1,360
1,500
987
1,000
165
500
475
50
0
2000
2001
2002
2003
2004
2005
2006
2007
The largest greenfield investments in SEE awards by OECD went to Serbia 3 years in a row:
Ball Packaging 2004, Metro cash & carry 2005, Airport City Belgrade 2006.
2008
GDP Growth Rate and GDP per capita, 2000 – 2008
in USD
7,000
10%
6,000
6,000
8.4%
GDP per Capita
5,641
Growth Rate
9%
8%
5,000
6.2%
3,285
4,000
4,207
7%
7.5%
3,526
6.0%
6%
2,720
3,000
1,574
5.7%
2,112
5%
2.5%
2,000
4%
829
4.8%
4.2%
1,000
3%
4.5%
0
2%
2000
2001
2002
2003
2004
2005
2006
2007
2008 est
Unemployment Rate, 2000 - 2008
25
20,8
21,6
18,8
18,5
20
15
12,1
12,2
2000
2001
13,3
14,7
14,6
10
5
0
2002
2003
2004
2005
2006
2007
2008*
* Unemployment rate of 14,7% is the result of harmonizing the methodology with EU standards. If old methodology was used,
unemployment rate would have been 17,5% in 2008
Public Debt 2000 – 2008 (in % of GDP)
180.0
160.0
140.0
120.0
100.0
Foreign Debt
80.0
Total Public Debt
60.0
40.0
20.0
0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008 est
SERBIA AND THE GLOBAL ECONOMIC CRISIS
The effects of the crisis:
 GDP growth rate contracting






negative impact on internal & external liquidity
the downfall of the market price of stocks
outflow of capital
decline in industrial production
decline in budget revenue
decrease in imports and exports
Faltering economic activity is due to:
 falling domestic & world aggregate demand
 decline in FDI
 contracted lending activity
However Serbia is in a more advantageous position than other countries in the region
due to its stable and liquid financial sector.
SERBIA AND THE CRISIS – GOVERNMENT
MEASURES
1. package of incentives to boost economic activities,export, investment
- subsidizing interest rate for liquidity & consumer loans (1,1 billion
EUR of loans)
2. reduction in public spending and bureaucracy
3. reprogramming of private debt due in 2009 and 2010
4. planning of capital infrastructure projects
5. conclusion of new arrangements with IFIs (IMF, WB, EIB, EBRD...)
- Agreement with IMF worth 3 billion Euros
Investments in Transportation Infrastructure
Corridor X
 Major part of Corridor X motorway is already
built. Three main sections to be completed
in the next 3 years
- 120 km towards Macedonia and Greece
- 100 km towards Bulgaria
- 110 km towards Hungary
- and Belgrade bypass – major bottleneck
on the Corridor X and a huge urban
transportation problem in Belgrade
 Total Investment of almost 2 billion EUR
(financed through EIB, WB, EBRD, Hellenic
plan and budget)
 Reconstruction and modernization of railway
network on Corridor X
Blue line – existing
motorways
Red Line – planned
motorways
LOOKING BEYOND
THE CRISIS
TRADE LIBERALIZATION
a key to stronger integration of Serbian trade in the European &
world market
EU – customs free export to the market
of 490 million consumers
• Serbia's Nº1 trade partner (53% of the
trade with the world)
• SAA with EU signed in 2008
FTA`s – RF
CEFTA
Belarus
Turkey
EFTA – ongoing
negotiations
WTO – accession expected in 2009/10
USA – preferential trade regime for
most products & services
██ EU member states
██ EFTA member states
██ CEFTA member states
EXCELLENT TRADE POTENTIALS
FTA with RF
• around 150 million consumers market
• Serbia only country outside CIS with
FTA with RF
• Around 98% of mutual trade is duty free –
50% rule of national origin
• Continuation of negotiations for further
liberalization
expected
for
passenger
vehicles, sugar, cigarettes, woven fabrics of
cotton, carpets, some furniture etc.
CEFTA
• 30 million consumers market
In 2008 total trade exchange with
world reached 23 bill EUR ( an
increase of 15.4% in comparison with
2007)
• 2nd major trade partner of Serbia
• Average share of trade with CEFTA
represents 16% of Serbia's total trade with
the world
• Serbia's substantial trade surplus in trade
with CEFTA
Favourable investment climate
Investment incentives provided by the government
• cash grants for investment in virtually all sectors
• special incentives for large scale investments
Significant investment opportunities
Infrastructure development
• Pan-European Corridor X (highways & railways)
• Energy (new thermal & hydro power plants & renewables)
• cargo terminal at the Belgrade airport
Over 15 bil. $ of FDI since 2001. EU member states
accounted for more than 70% of FDI inflow.
FDI by Branch of Activity in Serbia 2004 – 2008
million of $
Industry
Total (2004-2008)
Financial sector
5081,01
Manufacturing
2615,55
Transport and
telecommunications
2477,31
Wholesale and retail trade
1780,29
Real estate
1748,13
Hotels and restaurants
331,85
Construction
309,2
Agriculture
110,5
LEADING FOREIGN INVESTORS
Privatization & strong economic growth in recent years have attracted FDI.
At the same time there has been increase of other capital inflows.
Foreign - Owned Enterprises’ Share in
Exports of 25 Top Serbian Exporters
Significant foreign enterprise share in Serbian export is a result of
privatization process, restructuring and greenfield investments
Significant privatization opportunities
Privatization – 2500 companies
sold so far with the total sales
proceeds of 3 billion Euros and
additional 1,5 billion of investment
obligation.
Until now 377 foreign investors
participated in the privatization
process generating 1,6 billion
Euros in sales proceeds
Basic methods: tender, auction,
restructuring, sale of shares from the
share fund portfolio,
bankruptcy/liquidation.
Major real sector privatizations in
the pipeline
• Galenika pharmaceutical company
• Porecje,Vucje (fruits and vegetables processing)
• JAT Hotels, Belgrade
• Cable industry, Jagodina
• Inex Hotels, Belgrade
• Jumko, Vranje (textile)
• Simpo, Vranje (furniture)
• Severtrans Sombor (transportation)
Detailed information provided by the Privatization Agency of
the Republic of Serbia, www. priv.yu
THANK YOU FOR
YOUR ATTENTION!
Contact us:
Ministry of Economy and Regional Development
Bulevar kralja Aleksandra 15, Belgrade
www.merr.gov.rs