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Serbia: Relief behind the headlines

International media coverage of the late-January elections in Serbia tended to lead on the fact that the ultra-nationalist Radical Party – headed by Vojislav Seselj who has been indicted by the international tribunal in The Hague – won the most votes in the poll. However, the more important and more comforting fact is that a coalition from what is known as the democratic bloc of parties will ultimately form the new government in the Balkan republic.

The result has therefore been greeted with a sense of relief by bankers inside and outside the country. They are confident that any new administration in Belgrade will move quickly to ensure that Serbia’s economic reforms and eventual accession to the European Union progress as quickly as possible.


Stuart Culverhouse, chief economist at emerging market brokerage Exotix, says that the key political challenges facing the next government will be cooperation with the Hague war crimes tribunal, which is crucial to progress on EU membership. Serbia’s failure to hand over a number of alleged war criminals led to the suspension of negotiations on a stabilization and association agreement in May 2006. The future of Kosovo is another political bugbear, with most parties across the political spectrum refusing to countenance the concept of full independence for the republic, which has been a UN protectorate since 1999.

Strong growth

With regard to the economy, Culverhouse says: "The next government will inherit an economy that has made big strides in recent years. Real GDP grew by 6.5% in 2006 while the central bank’s core measure of inflation fell below the target of 7% to 9%, at 5.9%."

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