Reducing corruption, reforming the energy sector and fundamentally changing the secondary education system are the keys to faster economic growth
It was two months ago that Serbia gained a new government, the seventh since 2012. The previous ones left it with one of Europe’s lowest levels of GDP per capita, average income totalling around 46% of the EU27 average and insufficient growth rates. With the average growth rate of 2.7% that Serbia has had over the previous 10 years, it won’t be able to achieve the EU’s average income level for the next 50 years (Source: World Bank). As such, higher economic growth is essential.
There are multiple obstacles to growth that the new government should get to grips with. One of the biggest is corruption. According to analysis conducted by the Fiscal Council, Serbia has been growing at a rate approximately two percentage points (p.p.) below its potential for a decade. Almost half of that reduced growth is a result of weak rule of law and high corruption. By strengthening independent institutions (primarily the judiciary) and reducing corruption levels, Serbia could achieve growth almost 1 p.p. higher.
By strengthening independent institutions (primarily the judiciary) and reducing corruption levels, Serbia could achieve growth almost 1 p.p. higher
Apart from the removing of barriers to growth, energy is also becoming a crucial factor of economic growth and development. As such, the new government’s list of priorities must include reforms in this sector, based on decarbonisation and boosting investments in new capacities to produce electricity (using hydro, wind and solar energy, while considering nuclear energy possibilities). There must also be a focus on market liberalisation and the decentralisation of production that would lay the foundations for higher economic growth in this sector.
Finally, education reform imposes itself as a measure that would have lasting effects on the economy and society. Some possible measures within the scope of this include considering the introduction of compulsory secondary education, reforming ‘gymnasium’ high schools and increasing investments in the quality of educational personnel (and not only in facilities) to raise their standard.
This could all result in long-term growth exceeding 5%, which would enable Serbia to catch up with the EU’s average income level three to four times faster than is currently possible.