Serb business climate deteriorates

BELGRADE (Reuters) – Business conditions in Serbia have worsened since the start of the year and only 5 percent of firms expect an improvement after next weekend’s election, according to a survey published on Tuesday. Latest polls ahead of the May 11 election show the nationalist Radical Party slightly ahead of a pro-Western coalition, with both blocs well short of the majority needed to form a government alone. «The overall business climate has deteriorated due to growing political risk and weaker macroeconomic fundamentals,» said Milan Kovac of the Economics Institute, which carried out the survey of 300 firms. The survey found that while only 5 percent of firms expected things to improve after the election, 35 percent thought they would get worse. Only 20 percent expected foreign investment in the next three months. Chief economist Stojan Stamenkovic said that in the first two months of 2008, only the financial sector and foreign investments slowed down. «Now, we see the same across the entire economy,» he said. «Everyone is waiting for the election outcome. Growing uncertainty is the problem. No one can tell if all parties honestly plan to pursue the policies they offer to voters. If they do, one thing is certain – taxes will go down and spending will go up, fueling inflation.» Serbia’s recent economic data has made grim reading. Core inflation hit 8 percent in April, overshooting the central bank’s 3-6 percent target band for the year, with headline inflation rising to 12 percent according to local standards.