Facing slowdown, Serbia will overcome crisis, premier says

Cvetkovic vows to make it region’s ‘most attractive’ investment destination

People walk past a sign for currency exchange in central Belgrade yesterday. Serbia’s central bank governor, Radovan Jelasic, said yesterday the bank raised interest rates last week to counter high inflation.

By Katarina Subasic - Agence France-Presse

BELGRADE – Serbia faces an economic slowdown in 2009, buffeted like many Eastern European countries by global financial turmoil, but is confident of overcoming the crisis, Prime Minister Mirko Cvetkovic said.

“The world financial crisis will affect Serbia’s economy, but I hope it will not be too damaging... and that we might be able to get through the crisis with... (continuing) competitiveness,” Cvetkovic told AFP in an interview.

“We are sure there will be some negative impacts, mostly a lack of foreign investment, plus generally foreign capital inflows, including credit lines and other types of inflow,” he said. With investment “the most important item on our agenda,” Serbia, he added, would introduce measures to make it “the most attractive” out of the countries in its region.

Serbia expects foreign investment to reach $4.2 billion (3.3 billion euros) in 2008 despite instability after its ethnic Albanian-majority province of Kosovo unilaterally declared independence in February.

But Cvetkovic, who, after a stint as finance minister, took the helm of a new pro-Western government following subsequent elections in May, expressed confidence the crisis would not disrupt Serbia’s EU integration. “We are a European-oriented government (focused on) improving our financial and economic position” in spite of difficulties on its path to EU integration, such as the arrest of Serb war crimes fugitives, he said.

The European Union has conditioned Serbia’s EU integration on its “full cooperation” with the International Criminal Tribunal for the former Yugoslavia (ICTY).

For some EU members, including the Netherlands where the ICTY is based, that means Serbia must arrest the two remaining fugitives, wartime Bosnian Serb General Ratko Mladic and former Croatian Serb leader Goran Hadzic. The pair are widely thought to be hiding in Serbia. Within weeks of Cvetkovic taking office in July, former Bosnian Serb political leader Radovan Karadzic, who like Mladic is notably wanted for genocide over the 1995 Srebrenica massacre, was captured in Belgrade and transferred to the tribunal.

“Now after Karadzic, I would like to say that it is very problematic for anyone to say that there is no will” to deliver the remaining suspects, Cvetkovic said. “There is not so much technical progress but I still believe that willingness is something that anyone should consider as most important,” he said referring to the EU’s decision to freeze the implementation of a pre-membership trade and aid agreement with Serbia over the issue.

“It’s now Europe that should recognize our difficulties and I hope that they will decide rightly” to unfreeze the accord, “but even if they don’t, we are starting to implement it (unilaterally) from January 1.” Serbia hopes the implementation of the Stabilization and Association Agreement, signed in April but blocked ever since, will help to attract more investment, desperately needed to boost its fragile economy.

Gross domestic product (GDP) growth, which was 7.5 percent in 2007 and expected to reach up to 7.0 percent this year, was now unlikely to be any higher than 4 percent in 2009, Cvetkovic said. In addition, Serbia faces a budget deficit and was warned in September by a mission of the International Monetary Fund (IMF) that it was spending well above its means. The premier said his cabinet intended to “strengthen our fiscal policy and basically reduce government sector spending as well as in the private sector.”

“The whole idea for next year is to reduce the budget deficit to below 2 percent, from current 2.7 percent” of GDP, Cvetkovic said, adding that negotiations were under way with the IMF for a new arrangement but not a loan. “At this moment, we do not expect that any additional money will be required. We have discussed with the IMF an agreement so that they can monitor our situation and help us in achieving the goals” of the 2009 budget, Cvetkovic said.