At the beginning of November 2007, the Stabilization and Association Agreement with the European Union was initialed which will have a positive impact on the economic development of Serbia. In late November Instruments of Pre-Accession (IPA) Agreement was signed concerning the funds from EU IPA Fund in the amount of a billion Euros to be allocated to Serbia in 2007-2011 period. These funds will be used for the institution building, for social and economic development, for accelerated the European integration processes, as well as for the cooperation with the countries in the region.
According to the latest report of the European Bank for Reconstruction and Development (EBRD) which analyzes the progress achieved in structural and institutional reforms, Serbia is significantly legging behind other contending countries in transition. With an average mark of 2.7 annual transition index (unweighted arithmetic mean of the 9 indicators), Serbia has fell to 23rd-24th place in 2007 from 17th place in the last year. With the highest index value (4) Hungary has reached a level that is closest to the developed market economies. In addition to Hungary, Estonia, Czech Republic, Slovakia, Poland and Lithuania have jointed the group of the most advanced transitional economies. In the region of South East Europe, Bulgaria and Croatia have got the highest mark (3,5) and surpassed Romania (3.4). Macedonia and Albania have been marked by 3.1 and 3, Montenegro by 2.8 while both Serbia and Bosnia and Hercegovina have been placed in the lowest position (2.7). According to the EBRD, Serbia has achieved progress in 2007 only in competition from 1.7 to 2 (which is a low level), as a result of the improved implementation of anti-trust regulations, wider control carried out by the Committee for the Protection of Competition and the strengthening of its personnel capacities.
Real sector. Physical volume of industrial output, in the period January-October 2007, increased by 4.7 per cent over that in the same period in 2006. The growth of production was recorded in all three industrial sectors: mining and quarry (0.5 per cent), processing industry (5.5 per cent) and generation and distribution of electrical power, gas and water (2.8 per cent). In October 2007, industrial production increased by 3.2 per cent in comparison with October 2006. This rise in industrial production in October 2007 was largely due to sectors such as manufacturing of chemicals and chemical products, power generation and transmission, tobacco products, and coke and oil derivates production and food production.
Physical volume of construction works measured by the number of working hours on construction sites is higher by 1.3 per cent in the period January-September 2007 than in the same period last year, and the value of the completed projects expressed in fixed prices has recorded the growth of 14.4 per cent.
Retail sales in January - October 2007 period nominally increased by 30.7 per cent while, in real terms, they increased by 25.2 per cent, in comparison with the same period in 2006.
Demand, wages and prices. At macro level there is a growth in demand by the population. This is illustrated by the statistics relating to retail trade, wages, import of durable and non-durable consumer goods and credits incurred by the population. The average net wages and salaries of RSD 28,720 in October were nominally higher by 2 per cent while, in real terms, they were lower by 1.5 per cent compared to the previous month. Net wages and salaries increased in real terms by 17 per cent compared to the same month last year, and by 22.1 per cent in the period January-October compared to the same period last year. According to the regions, the highest net wages and salaries are recorded in the City of Belgrade (23.8 per cent, which is higher than the average for the Republic), while the lowest wages are recorded in the Toplica district (37.0 per cent below the average in the Republic).
In January-October 2007 period the number of employed declined by 1.2 per cent compared to the same period last year. The number of employed in companies, institutions and organizations declined by 3.4 per cent, while the number of employed in the private sector increased by 4.6 per cent. According to the statistics of the National Employment Office there were 871,628 job-seekers at the end of October 2007, which is 1.37 per cent drop on September 2007 and 13.3 per cent drop on October 2006. Of these, 797.127 were active jobseekers.
The overall retail prices went up by 8.7 per cent in January-November 2007, while by 8.8 per cent at the annual level (November 2006-November 2007). The major impact on the price growth in this period has been due to increased price controls, particularly the increased prices of electricity, oil derivatives and the increased prices of utility and housing services, as well as the increased prices of agricultural products as a result of bad weather, and the increased prices of the products of food-processing industry. Retail prices increased by 1.1 per cent in November compared to October (prices of consumer goods increased by 1.4 per cent and services by 0.3 per cent).
Monetary policy. By the end of October 2007 the money stock was RSD 215 billion which is an increase by 7.45 per cent compared to December 2006 and drop by 1.6 per cent compared to the previous month. Nominal money supply measured by monetary aggregates increased by 35.8 per cent compared to the same month in 2006. There is a high coverage of money stock by overall foreign currency reserves (361.8 per cent) and those of the National Bank of Serbia (346.6 per cent).
Public revenues. In January-September 2007 period, the distribution of public revenues and earnings amounted to RSD 860.8 billion and they are 19.5 per cent higher in nominal terms, i.e. 13 per cent in real terms, than in the same period in 2006. According to the Ministry of Finance, in the January-October period the budget receipts amounted to RSD 477.5 billion while expenditures were RSD 438.3 billion, and budget surplus was RSD 39.2 billion.
Foreign economic relations. The trend of intensified export and import growth continued. Total foreign trade in January-October 2007 amounted to US$ 21.7 billion, which is 39 per cent higher than in the same period last year. Exports increased by 39.1 per cent and imports by 39 per cent. Foreign trade deficit stands at US$ 7.4 billion, and is 38.9 per cent higher than in the period January-October 2006. The surplus in trade was achieved in the following sectors: food products and beverages (US$ 566.2 million), basic metals (US$ 187.7 million), recycling (US$ 142.9 million), rubber and plastic products (US$ 64 million) and garments and furs (US$ 16.4 million),other transportation means (US$ 10.9 million).
Privatization. In 2007 (until 28 November) 252 companies were sold through tenders or auctions generating an income of EUR 439.7 million and securing EUR 118.4 million for investment. The largest number of the sold companies (98) were from the sector of processing industry bringing EUR 168 million in income and EUR 59.0 million in investment (38.3 per cent of income and 49.8 per cent of investments from tender and auction privatization in 2007). Foreigners bought 28 companies for EUR 106.1 million (netting an income of 24.0 per cent from tender and auction privatization in 2007).
In 2007 (until 27 November) through the Share/ Stock Fund 743 transactions were made bringing EUR 159.9 million in income. For the first time the minority block of shares of 307 companies were sold at the capital market. The most important transaction (worth EUR 94.5 million or 59.2 per cent of the Fund in 2007) was the sale of shares in four companies: Putnik Beograd, Carnex Vrbas, BIP Beograd and PIK Becej, Becej, Kongrap Beograd and Radijator Zrenjanin.
At its meeting held in November 2007, the Development Fund approved credits for 199 long-term investment programmes in the amount of RSD 1.8 billion for 78 municipalities. Upon the realization of these programmes, 1,879 new jobs are to be created. In total RSD 186.8 million were granted for 20 programmes to speed up the development of underdeveloped municipalities, which makes 10.1 per cent of the total number of granted credits. Upon the realization of these programmes 361 new jobs are planned to be created.
Conjuncture perspectives. On the basis of results of a research conducted by the Republican Development Agency (RDA) on business climate (following ordinary monthly surveys and opinion of interviewed businessmen in industrial sector), the index for business climate in October compared to September 2007 recorded a fall due to unfavourable assessment of current business situation. The level of the business climate remained unchanged compared to October 2006. The highest RDA index of business climate in October 2007 were in the following sectors: production of food, beverages, tobacco, processing of leather and leather items, publishing, printing and reproduction of broadcasting media and production of basic metals. However, there are still significant constraints in the operation of industrial firms. The largest number of manufacturers (27 per cent) emphasized that the major constraint in their operation is the lack of financial resources and low prices, and only 5 per cent of interviewed businessmen have no business constraints.