The proposed Country Partnership Strategy (CPS) builds on the experience of the World Bank Group in supporting Serbian Government led reform efforts since 2001. The CPS aims to harness all parts of the World Bank Group, including IFC and MIGA, to support Serbia build on the progress of the past few years.
Reflecting Serbia’s strong economic progress, this CPS comes at a time of Serbia’s graduation to IBRD. This will require the Bank to work even more closely with the Authorities to ensure that the Bank program is demand driven and focused on supporting the Government’s own reform program. Over time, all parts of the Bank Group, including IFC, MIGA and WBI, are likely to play an increasingly central role in the Bank Group’s program.
Serbia has made significant progress on a wide ranging reform program since 2000. Macro-economic stability has been restored, and incomes have risen strongly. GDP per capita, estimated at $2,200 in 2002, is now approaching $5,400. Poverty has fallen fkom 14.6 percent of the population to about 8.8 percent. Growth has been underpinned by structural reforms to improve the business environment and the functioning of the enterprise sector. Public debt has almost halved as a proportion of GDP and reserves stand at over 30 percent of GDP. At the time of Serbia’s accession to Bank membership in 2001, analysis was focused on the importance of breaking with the past. Now, however, the theme of this partnership strategy might more appropriately be to build on the success of recent economic gains and seize the future.
The key economic priorities of the new Government are set out in the Memorandum on the Budget and Economic and Fiscal Policy for the Year (July 2007) and the 2008 Budget (Nov. 2007). Priorities outlined in these documents are set within the Serbia’s strategy for EU integration, adopted in 2005, and the Poverty Reduction Strategy (PRS), adopted in 2003. Key economic policy priorities include: (i) maintaining macroeconomic stability; (ii) promoting dynamic economic growth, through accelerated implementation of economic reforms; (iii) increased employment and living standards; (iv) more balanced regional development.
The World Bank Group's Program, Monitoring and Evaluation
The four year CPS is designed to ensure that the World Bank programming cycle is consistent with the anticipated political cycle in Serbia. Within the overarching framework of European integration and poverty reduction, the CPS supports three Government identified priorities: (i) encouraging dynamic private sector led growth to ensure incomes continue to converge with European levels; (ii) providing opportunities and broadening participation in growth; and (iii) managing emerging environmental and disaster risks .
Risks remain, particularly given the increasingly uncertain situation in the region arising from unresolved Kosovo status issues. Serbia also remains vulnerable to exogenous shocks. Managing risks will require that the Bank Group work cooperatively with the Serbian Authorities in a highly flexible manner in order to encourage Serbia’s continued international engagement and integration at a particularly sensitive time.
Serbia is well poised to continue its strong economic performance and make progress toward the goal of full European integration. Nevertheless, Serbia and the region have not yet fully moved beyond the difficult legacies resulting from the turmoil of the 1990s. A key challenge will be to ensure that this reform momentum is able to be continued, and that international confidence and regional stability is maintained, at a particularly sensitive time for Serbia.
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