* In Q4 2009 GDP at the level of Q4 2008
* Foreign trade deficit at EUR 4.7bn
* Decline in industrial production less sharp
* Physical volume of transport down by 16.1%
* Unemployment rate rose to 16.6%
* Inflation at 6.9%
* Revenues from tender and auction privatization at EUR 75.7m
* Activity of Fund for Development up by 70%
Special analyses:
- Business Climate and Forecast of Trends in Manufacturing
- index of Financial Crisis (RDB IKAC)
- Competitiveness and Structural Changes 2009
- analysis and Forecast of GDP of Serbia 2009 – Major Results
- Degree of Development of Regions
- Enforcement of the Small Business Act of the European Union
CURRENT TRENDS - SUMMARY
The end of 2009 was marked with positive tendencies of the process of Serbia’s accession to the European Union. Council of Ministers of the EU on November 30 adopted a Decision to abolish visas for the citizens of Serbia as of December 19 for traveling to countries that are members to the Schengen agreement, which is a clear political signal that attests to the European perspective of the Republic of Serbia. On the basis of the Decision of the Council of the European Union of December 7, the Interim Trade Agreement with Serbia was unblocked. Through implementation of the Interim Trade Agreement Serbian exporters will obtain the guarantee that they can keep exporting their products customs-free into the EU countries. In this way Serbia would move from the regime of unilateral, autonomous trade measures to a real contractual relation with the EU. On December 19 the request for becoming a member of the European Union was submitted. Memorandum of the Government of the Republic of Serbia related to submission of the request for admittance to the EU membership reflects a general consensus as regards the European orientation of Serbia.
The global economic crisis negatively impacted on economic activity in 2009. A drop in domestic and global demand, deceleration of credit activity and foreign direct investments resulted in a decrease in industrial output, exports, imports, the value of construction works, and retail trade turnover. Through implementation of the Government set of measures of economic and monetary policy Serbia managed to avert deeper disturbances of the financial and real sector and in this way macroeconomic stability was maintained and recession tendencies kept at bay. Macroeconomic developments in the fourth quarter of 2009 were characterized by positive trends.
International economic developments. In the EBRD Transition report for 2009 Serbia’s overall average grade of transition progress slightly improved from the last year’s 2.85 to 2.89. Serbia improved its grade in the field of trade and foreign trade, one of the nine categories, owing to enforcement of the interim trade agreement with the EU. Serbia is now ranked 22nd among 29 analyzed transition countries. Behind Serbia are Azerbaijan, Belarus, Bosnia and Herzegovina, Montenegro, Tajikistan, Turkmenistan, and Uzbekistan. The economic crisis hit hard the transition region and slowed down the rate of new reforms but what is most encouraging is that the crisis did not stop the transition, reform realized over the previous fifteen years have proved to be crisis-resistant, and there has been no systemic banking crisis, uncontrolled collapse of the currency, or inflation skyrocketing. The quality of transition and integration processes realized before the crisis had proved to be an efficient response to the crisis. 2009 was characterized by a small number of improvements relative to previous years. There were 14 improvements for 11 countries but also 4 deteriorations. Countries that managed 2 improvements were Belarus, FYR Macedonia, and Montenegro. Hungary has the highest medium value of the indicator (4) and is closest to the level of developed market economies. In addition, the group of most advanced transition economies comprises Estonia, Poland, Slovakia, and Lithuania (3.9-3.7). In the region of see there have been no significant changes in relation to the previous year. The best assessment was given to Bulgaria (3.6), Croatia (3.5), and Romania (3.4).
EBRD transition indicator (chart)
Economic development. After a major impact of the crisis on Serbian economy n early 2009, the second half of the year saw a moderate recovery of economic activity. According to the RSO data, GDP in the third quarter of 2009 in comparison with the third quarter of 2008 was down by 2.3%, and over the period January-September by 3.5%. For Q4 2009 the Republic Development Bureau estimates a minimum drop of GDP of -0.1%, while for 2009 an estimated drop in GDP is -2.7%.
Sector contribution to GVA growth (chart)
Foreign trade activity is under the impact of deceleration of demand on markets of most significant trade partners of Serbia, and in the period January-November amounted to EUR 15.3bn which is by 26.3% less than in the same period of 2008. The export of goods was down by 20.9% and the import by 28.9%. Foreign trade deficit equaled EUR 4.7bn and was by 36.4% down on the same period 2008. Trade surplus during the period January-November 2009 was generated in fields: food products and beverages (EUR 414.6m), recycling (EUR 65.7m), clothing and fur (EUR 42.5m), rubber and plastic products (EUR 24.0m), and basic metals (EUR 1.1m). High trade deficit was registered in fields: chemicals and chemical products (EUR 1.2bn), motor vehicles and trailers (EUR 662.5m), other machinery and equipment (EUR 526.8m), coke and oil derivatives (EUR 341.4m), radio, TV and communication equipment (EUR 270.3m), pulp, paper and paper products (EUR 207.5m), precision and optical instruments (EUR 182.7m), and textiles and yarns (EUR 148.9m).
The physical volume of industrial output in Jan-Nov 2009 on Jan-Nov 2008 fell by 13.1%. Viewed by purpose, the fall was recorded in the production of energy, of 1.0%, intermediate goods, except energy, of 24.3%, capital goods, of 23.4%, durable consumer goods, of 26.5%, and non-durable consumer goods, of 9.0%. The volume of industrial output in November 2009 in comparison with November 2008 decreased by 4.2% with 21 areas (the share in the structure of industrial output of 79%) and increased with 8 (the share in the structure of industrial output of 21%). Sections that contributed most to the fall of industrial output in November 2009 were: Manufacture of non-metallic minerals, Manufacture of chemicals and chemical products, Manufacture of food products and beverages, Manufacture of furniture, and Electricity supply.
According to results of the RDB research on Business climate (regular monthly surveys conducted by RDB), BCI – Business Climate Indicator of manufacturing industry registered a mild drop in relation to October 2009 because of a drop in the production assessment, demand, and stocks of finished products in spite of the rise in the assessment of exports and production expectations. According to surveyed producers of manufacturing industry, assessment of output was positive but lower than in October 2009 and below the long-term average. On the basis of production expectations that suggest leveling off of cyclical developments and going out of recession growth of production activity for the next three months is assessed.
Gross value added of transport and telecommunications (chart)
Over the period January-November 2009 retail trade turnover dropped in real terms on an inter-annual level by 11.3% and in nominal terms by 5.2%. In November 2009 relative to October retail trade turnover dropped further by 7.9% in current prices, i.e. by 9.3% in fixed prices.
Labour market. Over the period January-October 2009 total employment was down by 6.3%, in enterprises, institutions and organizations by 0.9%, and the number of private entrepreneurs and their employees fell by 19.9% compared to the same period 2008. The largest decrease in employment at the level of activity was in manufacturing industry, of 7.3% (26,930 persons). In November 2009 the tendency towards a falling number of persons seeking employment and the unemployed which began in June continued. At the end of November 2009 there were 803,171 persons, which was by 0.4% less than in October and by 2.6% more than in November 2008.
In October 2009 a semi-annual Labour Force Survey was conducted. The total number of employees in the second half-year of 2009 went down by 2.0% (i.e. by 52,498 persons) compared to the first half-year of 2009, i.e. by 7.7% (215,119 persons) compared to 2008. Moreover, the rate of employment went down by 0.8 percentage points on the first half-year and by 3.3 percentage points on 2008 (from 53.3% in 2008 to 50.0% in 2009). The total number of the unemployed was up by 5.9% (i.e. by 28,774 persons) in comparison with the first half-year of 2009, i.e. by 13.1% (i.e. by 60,164 persons) in comparison with 2008. The unemployment rate was up from 14.0% in 2008 to 16.6% in 2009, which is a signal of further negative developments on the labour market.
In the period January-November 2009 the tendency of decelerating growth of average gross and net earnings relating to the same period 2008 continued. Average net earnings amounted to 31,291 dinars and were up nominally by 9.0% and in real terms by 1.0%. The highest net earnings in November was registered in financial intermediation (67,279 dinars), manufacture of tobacco products (64,468 dinars), air transport (63,903 dinars), membership fee organizations (61,609 dinars), insurance and pension funds (59,609 dinars), extraction of crude oil and gas (56,106 dinars), manufacture of coke and oil derivatives (50,749 dinars), while the lowest earnings were registered in some sections of manufacturing industry such as manufacture of wearing apparel; dressing and dyeing of fur (11,554 dinars), manufacture of leather and leather products (14,866 dinars), manufacture of wood and cork products (15,414 dinars), manufacture of textiles and textile products (17,211 dinars).
Average pension in Jan-Oct 2009 amounted to 19,785 dinars, up in real terms by 6.3% on the same period 2008. Average disbursed pension in October 2009 amounted to 19,799 dinars, up on October 2008 by 0.2% in real terms and equaled 63% of average net earnings.
Prices. Headline inflation over the period January-November 2009, measured by the Consumer Price index, stood at 6.9% (Nov 2009/ Dec 2008) and for the most part was a result of the rise in regulated prices. In November consumer prices rose moderately by 0.8%, whereas the annual rise in consumer prices stood at 5.9% (November 2009/ November 2008). In 2009 retail prices rose in total by 10.1% (period’s average), while their rise in December 2009 on December 2008 stood at 10.4%. Viewed structurally, the most intensive rise in 2009 was that of tobacco prices (14.9%), services (13.9%), non-food products (12.8%), and beverages (10.9%). The total current rise in retail prices was neutralized by reduction of prices of agricultural products (0.3%).
Inflation (chart)
Monetary developments. In 2009 the NBS was pursuing a relaxed monetary policy. The NBS lowered the key interest rate from 17.75% at the beginning of the year to 9.5% at the end of December 2009.In the second half of 2009 credit activity recovered moderately. Bank loans at the end of November 2009 (1,284.4bn dinars) increased by 14.2% in comparison with the end of December 2008 (1,124.9bn dinars). In the same period loans to industry rose more (18.1%) than loans to households (7.5%). The total household savings at the end of November 2009 reached 555.7bn dinars (foreign savings equaled 544.4bn dinars and dinar savings 11.3bn dinars) and in relation to end December 2008 went up by 31.2% (foreign currency by 31.6% and the dinar by 14.6%) and compared to the same month of 2008 it went up by 30.0% (foreign savings was up by 30.6% and the dinar by 9.7%).
Balance of payments. Current account deficit reached only 27.7% of the value of 2008 and it amounted to EUR 1.3bn. Negative balance of the current account of the balance of payments in % GDP after a high share in Q1 2009 (-12.3%) was falling. In Q2 and Q3 it stood at 2.4% and -3.4% respectively. Foreign direct investments – net over the period January-October 2009 amounted to EUR 1.1bn and on January-October 2008 were down by 36.9%.
External debt in October 2009 amounted to USD 21.9bn and in relation to December 2008 it was up by 0.4%. Long-term liabilities reached EUR 19.8bn, and short-term debt EUR 2.0bn. In comparison with December 2008 long-term liabilities were up by 2.4%, while short-term debt was down by 15.6%. Total foreign exchange reserves in November 2009 reached the highest annual level over the previous transition period and amounted to EUR 11.2bn (USD 17.1bn). In an environment of a limited access of banks and enterprises to external sources of funding, a slower inflow of forex resources from abroad, and a rise in the risk premium, Q1 2009 saw high oscillations of the dinar exchange rate. In Q2 and Q3 a portion of external liabilities was refinanced, a financial arrangement with the IMF was signed, and foreign exchange liquidity during the period was progressively rising. The dinar exchange rate against EUR and USD in November oscillated in the range of 93.43-94.48 RSD/EUR and 62.62-63.94 RSD/USD, havign been formed on the basis of immediate banking trade.
Budget finance. Budget revenues during the period January-November 2009 amounted to 585.3bn dinars, expenditure 663.6bn dinars, and budget deficit 78.3bn dinars. In comparison with the same period 2008, budget revenues in real terms were down by 7.6%, and budget expenditure by 0.7%.
privatization. In 2009 through tender and auction privatization 75 companies were sold, generating EUR 75.7m of revenues and providing EUR 43.0m for investment. Through tender privatization 7 companies were sold, generating revenues of EUR 31.5m and providing investments of EUR 31.5m. Through privatization of assets of JSC Jugoslovensko recno brodarstvo Belgrade the greatest revenues were generated (EUR 24.5m) and the greatest investments at tenders were contracted (EUR 15.7m). From the share Fund portfolio in 2009 minority packages of shares of 206 companies were sold for EUR 7.7m. Foreign purchasers participated in the purchase of minority share packages of 23 companies. After a sales contract between the privatization Agency and purchasers was broken, the share Fund sold share packages of 14 companies.
In 2009, the Fund for Development approved credits totaling 27.7 bn dinars for 4,296 long-term investment programs in 154 municipalities. It has been planned that the realization of these programmes should create 20,683 new jobs. Of the total value of approved credits, the largest funds were earmarked for Manufacture of food products, beverages and tobacco (6.9bn dinars for 907 programmes), followed by Manufacture of machinery, metals and metal products (5.5bn dinars for 364 programmes), and Manufacture of wood and wood products (2.5bn dinars for 454 programmes). Almost half of the total funds were invested in these three areas of economy (54.6%).
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To view the original document and the special analyses, please click on the links below:
http://reports.aiidatapro.com/SOG/SED_Dec_2009.pdf
http://reports.aiidatapro.com/SOG/SED_Special_Analysis_Index_Financial_Crisis_Dec_2009.pdf
http://reports.aiidatapro.com/SOG/SED_Special_Analysis_Degree_Development_Regions_Dec_2009.pdf
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