Economic Policy Research & Articles


·         Macroeconomic Strategy, Forecasts and Assessments

·         Fiscal Policy

·         Fiscal Responsibility

·         Public Debt, Deficits and Balances

·         The Informal Economy

·         Serbia and the Region

·         From International Organizations

·         Program budgeting / Performance - based Budgeting



Macroeconomic Strategy, Forecasts and Assessments


Serbian Post-Crisis Economic Growth and Development Model 2011-2020 Executive Summaries

Serbia has to make a thorough U-turn aiming at successful economic growth, since it has run out of all possibilities and presumptions which served as a basis for development in the previous decade. This report contains and extensive set of projections and analysis to promote a new model of economic growth.
Source: Economic Institute and FREN, August 2010


Serbia 20/20

In December of 2010, Serbian PM Mirko Cvetković and his deputy Boľidar Đelić presented a draft vision for the future development of Serbia.
Source: Government of Serbia


Economic forecast for Serbia 2011 and 2012

This report comprises the economic forecast for Serbia for the period 2011 to 2012. This forecast has been generated with a macro econometric model, which has been developed in cooperation between Vojvodina CESS and the Institute for Advanced Studies (IHS) Vienna and Economica, Institute for Economic Research, Vienna1.
Source: CESS, 2011


Ten years of Transition, the Serbian Growth Experience-What's next?

For more of the decade the Serbian economy grew strongly, fuelled by both domestic demand and exports, and on the back of significant economic changes since 2000.This growth model was largely financed by easy and cheap access to foreign financing (including from foreign owned banks) and significant capital inflows i.e. FDI. Like in many countries in the region, the impact of the global financial crisis on Serbia was significant. What are the possibilities for the future?
Source: FREN, Sep 2009


Serbia's Economic Growth and International Competitiveness

Competitiveness of Serbia’s economy i.e. creating prerequisites for stronger growth of enterprise productivity, should be one of the economic policy priorities in the upcoming period.
Source: FREN, Jun 2009


Data! Data! Data! You Cannot Build a House without Bricks!

Data is what is supposed to help us answer many questions. Why do we still have inflation? Where are the reserves for speeding up economic growth located? Is it possible to reduce both the balance of payments deficit and inflation, while accelerating economic growth? Do we know for sure what economic policy makers are supposed to do?
Source: FREN, March 2011


The exchange Rate, Wages and Serbia’s International Competitiveness

Source: FREN, Jun 2010


Fiscal Policy


An Institutional Assesment and Recommendations for the Macro - Fiscal Department in Serbia
This report was prepared by the USAID Business Enabling Project (BEP) to assist the Serbian Ministry of Finance and Economy (MFE) to strengthen its economic policymaking capacity. In distributing this report USAID BEP aimed to help the MFE and its Macro Fiscal Department (MFD) to: 1) Better understand the role and functions of a Macro Fiscal Department in the EU context; 2) Identify the organizational structure and analytical capacity necessary for improved scope and quality of macroeconomic and fiscal analyses; 3) Develop a medium-term strategy (action plan) to respond to the immediate and medium-term capacity gaps of the department.
Source: USAID BEP 2012


Budget System in Serbia: institutional Framework and Practice
Performance of the public finance system is largely determined by the quality of the institutional framework for operations of the country’s budget system. The existing institutional framework of the Serbian budget system was significantly improved in recent years by adoption of new regulations and the establishment of relevant institutions such as SAI, Fiscal Council and others.
Source: MAT, January 2012


Macroeconomic and Distributional Effects of Efficiency-Driven Tax Reform Proposal

Reducing fiscal burden on wages would stimulate employment and would increase price-competitiveness of Serbian producers, thus stimulating economic growth. Overall income redistribution effects of the proposed tax reform would be progressive in the short and medium-term since VAT increase would have proportional distributional effects and reducing fiscal burden on wages would have progressive distributional effects.
Source: FREN, September 2011


Fiscal Consolidation through Tackling Labor Taxes Evasion?
This paper uses micro data obtained from the Living Standards Measurement  Survey to estimate and analyze the prevalence of evasion of taxes and other dues payable on labor income in Serbia. The results indicate that the ratio of undeclared-to-declared income is 26.9%, a figure higher than in other transition and developed countries.
Source: FREN, September 2011


VAT Revisited: A New Look at the Value Added Tax in Developing and Transitional Countries

This paper looks at questions about the design and performance of VAT tax. It also looks at whether VAT tax is a way to tap the informal sector
Source: USAID, October 2005


Fiscal Policy for the Crises

Outlines some important fiscal policies and reforms for getting through the financial crises
Source: IMF, December 2009


Fiscal Decentralization in Developing Countries - A Review of Current Concepts and Practice

Fiscal decentralization and local government reform are major topics in transitional markets and there has been considerable debate about the best way to achieve it. This paper examines the origins, conceptual foundations and practice of fiscal decentralization in developing countries.
Source:UNIRSD, February 2001


World Wide Trends in Fiscal Decentralization

How to arrange fiscal powers and responsibilities between the different levels of government is a question at the center of policy debate in countries around the world. In Serbia, the question should be among others at the top of the agenda, given rising fiscal pressures, recent amendments to the Law on Local Self Government, and rising interest among municipalities to raise their own debt. This paper is about the costs and benefits of fiscal decentralization, and the practice.
Source:World Bank


Supporting Investment and Employment in Serbia: subsidies versus business environment improvement

Subsidies represent an expensive and inefficient way to stimulate investment and employment, which only partially offsets weaknesses of Serbia’s economic system. The end of the economic crisis would mark a convenient moment for a radical cut in subsidies. Many of the subsidizing mechanisms applied in Serbia are not in line with EU Directives, because they violate competition.
Source: FREN, Sep 2010


Serbia’s Revised 2010 Budget and 2011 Fiscal Policy

Serbia’s overall fiscal policy framework for the coming years has  been  determined  with  fiscal responsibility rules. Those rules anticipate a gradual reduction in the fiscal deficit and strict control of the public debt in the coming years
Source: FREN, Sep 2010


Short-term Fiscal Stimuli or Budget Deficit Reduction

The present economic policy dilemma in Serbia is whether to stimulate economic activity (while it is significantly below its potential) through an increase in public spending or to immediately start with medium-term reductions of public spending and the deficit.
Source: FREN, Jun 2010


First Serbian Tax-Benefit Micro Simulation Model – SRMOD

When the global economic crisis hit Serbia’s economy and the countries in the region in late 2008, economic policy makers started deliberating several stabilization and stimulation measures. Most countries applied a similar strategy:
Source: FREN, Mar 2010


Comparative Analysis of Alternative Tax Reform Proposals

With Serbia facing a high structural deficit, it is assessed that all proposed sustainable tax reforms should be revenue neutral or to generate some additional revenues measures planned long before the onset of the crisis, entailing cuts of personal income taxes and mandatory social security contributions and facilitating administrative procedures, and future major infrastructure projects were presented as instruments designed precisely to overcome the crisis
Source: FREN, Mar 2010


Tax Policy in Serbia-looking forward

Most important objectives of tax reform proposed in this monograph are to strengthen macroeconomic stability and create favorable conditions for employment and investment. The main direction of changes in the tax system being proposed is to reduce the fiscal burden of work and increase the fiscal burden on consumption.
Source: FREN, Dec 2010


Fiscal Consolidation and Public Sector Reform

Public sector reform and its fiscal consolidation are thus prerequisite for improving state efficiency and pre-empting a debt crisis. This paper analyzes various modalities of fiscal consolidation, such as (a) fiscal consolidation entailing exclusively a cut in current public spending and (b) fiscal consolidation entailing both a cut in current public spending and an increase in tax rates.
Source: FREN, Jun 2009


The challenges of introducing mandatory private pension system in Serbia

Source: CLDS, 2009


Capitalization pension insurance in Serbia

This study was written for the Republic Fund for Pension and Disability Insurance Fund. Their purpose is to examine the possibility of long-term solution of problems of public pension systems in Serbia, particularly possibility of creation and operation of investment reserve pension fund
Source: CLDS, 2008


Fiscal Responsibility


Proposed Fiscal Consolidation Measures 2012-2016

The size of both short-term (2012 and 2013) and medium-term (2014-2016) adjustment demands serious measures first and foremost on the side of expenses, but also a tax reform. Fiscal consolidation proposed in this document envisages 4:1 ratio in favor of the decrease of expenses in comparison with the increase of revenues. This comes out of the fact that international experience shows that permanent recovery of public finance can be achieved first and foremost by the decrease of expenses, and also that public expenditures in Serbia are higher than in any comparable country.
Source: Fiscal Council, May 2012



Fiscal Consolidation in Southeastern European Countries: The Role of Budget Institutions

This paper assesses the relative strengths and weaknesses of fiscal institutions in ten Southeastern European countries, using recent benchmarking methodologies developed by FAD. The assessment evaluates each country’s understanding of the scale of the fiscal adjustment challenge, its ability to develop a credible consolidation strategy, and its capacity to implement the strategy. In its working paper the IMF giving the Serbian Fiscal Council an overall rating of B. Second best rated fiscal agencies were those of Croatia and Romania with an overall rating of C, while failing grade was given to fiscal agencies of six other countries including EU’s Bulgaria. IMF found that Serbian Fiscal Council is the only independent fiscal agency in the region fully evaluating ex post fiscal performance besides fully evaluating ex ante fiscal policy.
Source: International Monetary Fund WP/12 May 2012


Highlights:New Fiscal Rules for Improved Public Debt Control in EU

To forestall the outbreak of a possible debt crisis, a growing number of countries are introducing new or tightening existing fiscal rules in an effort to prevent uncontrolled public debt growth and keep the debt down within defined limits so that it would not pose a threat to solvency and economic activity of the states. Public debt is most directly managed through implementation of fiscal rules defined in the form of a debt ceiling expressed as a percentage of GDP.
Source: FREN, Dec 2011


Why Law on fiscal responsibility- just Serbian version

Source: CLDS, Oct. 2010


An Analysis of the Proposal to Increase the Local Governments’ Share in the Wage Tax

The study showed that the transfer of taxes from the central to the local tiers of government, without a transfer of liabilities, would increase the deficit of the budget of the Republic and the consolidated government, jeopardizing fiscal and macroeconomic stability.
Source: FREN, Mart 2011


Strengthening of Fiscal Responsibility through Fiscal Rules

Even in countries with long-standing democratic tradition it had been observed that macroeconomic instability, measured by inflation and unemployment rates, was firmly linked to political cycles. Ahead of elections, as a rule, monetary and fiscal policy expansiveness was growing with an aim of boosting the chances of ruling parties in the elections.
Source: FREN, Dec 2009


Public Debt, Deficits, and Account Balances

Reform of InterGovernmental Finance Systems in Serbia
Source: GTZ, 2008


Doing More with Less: Addressing the Fiscal Crisis by Increasing Public Sector Productivity

This report is focused on identifying opportunities for efficiency gains in the major categories of Government expenditure.
Source: World Bank, June 2009


Fiscal Consolidation and Public Sector Reform

This paper looks at the various modalities of fiscal consolidation, looking at both decreasing expenditures and increasing revenues
Source: FREN, USAID March 2010


Mechanisms of Mobilization and Alternative Allocation of Public Funds

This paper discusses some institutional defects and potential for improvement. One of almost insuperable legacies of the previous socialist order includes excessive public expenditure, which is widely accepted to be unsustainable in the long run. The exorbitant burden of public expenditure is largely interpreted as a solid financial basis for equally hypertrophied and overpowering state that may become a threat for the process of democratization and strengthening of human rights and freedom
Source:Ministry of Finance, 2008


PEFA Public Expenditure and Financial Accountability (PEFA) Assessment - Public Financial Management Performance Report, 2010

This report provides an assessment of the status of the PFM systems and processes of the Republic of Serbia at July 2010. The Report follows the PEFA methodology and, as such provides a direct comparison with the 2007 PEFA assessment. Serbia has now completed two PEFA assessments and the process has provided a robust platform for an assessment of progress in the PFM process since 2007.
Source: PEFA, 2010


Public Expenditure Review Serbia - Right-sizing the government wage bill

Serbia's public sector wage bill constitutes a significant share of total government expenditure. At present, it is significantly higher than in most neighboring European Union (EU) member countries. This is largely due to higher average levels of compensation, rather than higher levels of staffing.
Source: World Bank report, 2009


Government vs. Public Debt: Definition, Institutional Scope, Financial Reporting and a Few Other Things

Source: FREN, Mar 2011


The Effects of the Suspension of the Law on Local Government Finance on the Revenue and Expenditure Behavior of Local Governments, 2007–2009

This article examines the revenue and expenditure responses of local governments to the decrease in their revenues caused by the current economic downturn and by the Government of Serbia’s (GoS) suspension of the transfer system put in place by the 2006 Local Government Finance Law (LGFL).
Source: FREN, Sep 2010


The Informal Economy


Effectively Combating the Informal Economy

Social Economic Council of the Republic of Serbia (representatives of the Ministry of Labor and Social Affairs, Union of Employers, the Union of Independent Trade Unions of Serbia) analyzed the results of surveys, conducted among employees and the unemployed n Serbia in 2010.
Source:Social Economic Council, 2010


Earnings Inequality and the Informal Economy: Evidence from Serbia

This study provides the extent and evolution of informality and inequality in the Serbian labor market between 2002 and 2007, using data from the Living Standard Measurement Surveys (LSMS). Two surprising results emerge. First, the level of informal employment has risen significantly over the period, despite strong economic growth and the introduction of a range of market-oriented reforms.
Source:EBRD, 2008


Impact Analysis of Employment Policy and Active Labor Market

This study provides an assessment of the overall impact of employment policy and active labor market programs (ALMPs) on general and specific labor market outcomes in Serbia. ALMPs include job brokering and counseling services, training and job subsidies.
Source: Inkluzija, 2008


The Shadow Economy and Shadow Economy Labor Force: What Do We (Not) Know?

The most influential factors on the shadow economy and/or shadow labor force are tax policies and state regulation, which, if they rise, increase both.
Source: The Institute for the Study of Labor (IZA),2011


The Size and Development of the Shadow Economies of 22 Transition and 21 OECD Countries

Using the currency demand and DYMIMIC approaches estimates are presented about the size of the shadow economy in 22 Transition and 21 OECD countries. Over 2001/2002 in 21 OECD countries is the average size of the shadow economy (in percent of official GDP) 16.7% of “official” GDP and of 22 Transition countries 38.0%
Source: The Institute for the Study of Labor (IZA), 2002


The Devil is in the Shadow- Do Institutions Affect Income and Productivity or Only Official Income and Official Productivity?

This paper assesses the relationship between institutions, output, and productivity, when official output is corrected for the size of the shadow economy.
Source: The Institute for the Study of Labor (IZA), 2007


The Informal Economy in Central and Eastern Europe – Obstacle to European Integration or Bridge between the EU Member States and the Accession Countries?

Twelve countries of Central and Eastern Europe are preparing for accession to the European Union. The informal economy in these countries is a phenomenon, which may bring challenges to the process of European integration because of the insufficient knowledge about its possible implications for an enlarged union
Source: Center for Study of Democracy, Sofia, 2003


Informal Employment in Serbia

Informal employment represents a significant phenomenon in Serbia. Labour Force Survey (LFS) records show that more than one fifth of the labour force (when we include the agriculture sector), works informally.
Source: FREN, Dec 2009


The Shadow Economy in Serbia - Study

New Findings and Recommendations for Reform - Full Study


The Shadow Economy in Serbia - Summary

New Findings and Recommendations for Reform - Executive Summary


Serbia and the Region


The Impact of the Global Crisis on South-Eastern Europe

This paper analyzes the impact of the global crisis on six South-Eastern European countries. The main objective is to compare macro-financial conditions and policies in the run-up to the crisis as well as to compare the policy responses to it, so as to highlight, inter alia, possible country-specific constraints. While sharing a common pre- crisis pattern of strong capital inflows and robust growth, a key difference in the conduct of macroeconomic policies is that some countries adopted expansionary (and procyclical) fiscal policies
Source: IMF, 2011
Link: The Impact of the Global Crisis on South-Eastern Europe


CEFTA 2007-2010 Experiences, potential and perspective

CEFTA may provide conditions for harmonized commercial trade within the region and indirectly brings significant benefits which are primarily related to the possibility of easier entrance in neighboring markets which were difficulty available (Croatian market for Serbia, for example) and increased participation in other markets within this Agreement. There are many challenges to achieve integration – for example complicated border-crossing procedures, extensive administrative work, insufficient number of internationally recognized accreditation and certification bodies.
Source: CNP, Feb 2011


European View of Serbia

How is Serbia viewed from the point of view of European Union members? This paper provides some perspectives.
Source: Fokus, CLDS, Jan 2011


From International Organizations


Republic of Serbia - Country Economic Memorandum - The Road to Prosperity: Productivity and Exports

Before the crisis Serbia’s growth performance had been solid, but characterized by major imbalances. In the last decade, Serbia‘s growth relied primarily on domestic demand. In the future, however, Serbia could do much better by emphasizing the development of exports as a new, potentially powerful, source of growth. The share of exports in Serbia‘s GDP, currently only 25 percent, should be double or triple of that, which is the current average for the new EU member states. The point is not that consumption should be cut but that by pushing exports and thus speeding up growth, all components of GDP could grow faster.
Source: World Bank, December 2011
Link: The Road to Prosperity: Productivity and Exports - volume 1 of 2
Link: The Road to Prosperity: Productivity and Exports - volume 2 of 2

Monetary exchange rate policies in emerging market economies

This note examines the case for using two policy instruments—the policy interest rate and sterilized foreign exchange market intervention—in emerging market countries aiming to maintain low inflation while avoiding currency movements that clearly represent substantial deviations of the exchange rate from its medium-run multilaterally-consistent value. Fully discretionary monetary and exchange rate policies obviously allow maximum flexibility in responding to unexpected shocks. Our analysis highlights the benefits for the monetary authority of signaling that the policy interest rate will be used to safeguard the primacy of the inflation target. This note also briefly considers some multilateral aspects of monetary policy, in particular the interaction of policies across emerging-market economies, and how unilateral actions compare to cooperative solutions.


Serbia’s New Economic Model: How Can it Take Off?

Kopaonik Business Forum , March 2012



Program budgeting / Performance - based Budgeting


Study on Effective Use of Performance Indicators in Public Sector Budgeting and Planning

The main objective of the study is to help Serbia restart the budget reform process and benefit from performance budgeting through efficiency gains and expenditure reductions. The study aims to inform the Budget Department of the Ministry of Finance (BDMoF) on effective use of performance indicators in public sector budgeting and planning based on international experience in this area. In addition, the study will provide guidance in improving the performance measurement system relevant for the ongoing efforts of the General Secretariat (GS) to establish a coherent reporting, monitoring, and evaluations system for improved policy making and planning.
Source: USAID BEP 2012


Program and Performance Budgeting Experiences from South East Europe: Their Role in the Fiscal Consolidation Process

Most South East European countries have introduced some performance dimension into their budget processes, but only one of 10 surveyed has in place all the institutions needed to fully integrate performance information into budget decisions. Specifically: –Although all but one country (Serbia) fix performance objectives or targets for some portion of expenditure, only two countries (Croatia and Moldova) regularly conduct comprehensive reviews of program performance; –Only one country (Croatia) has a comprehensive performance budgeting system which combines all of the above elements. --Four countries (Albania, Bulgaria, Croatia, and Kosovo) use programs as the legal basis for expenditure appropriations, while the remaining countries include a program classification of expenditure in their budget documentation.
Source: IMF 2012


Performance-based Budgeting-Manual

The manual Performance-Based Budgeting covers a wide range of topics including program budgeting, the performance information underpinnings of PB, and the relation of PB to other budgeting and accounting reforms. Performance budgeting is a challenging but potentially important reform in the ongoing struggle to make government more results‐oriented. Coupled with other “managing for results „reforms, it can help substantially improve the effectiveness and efficiency of public expenditure. The objective of this manual has been to provide an outline of key forms of performance budgeting, their differing performance information requirements, the key design and implementation issues which they raise, and their pre‐requisites and co‐requisites.
Source: Marc Robinson, 2011


Moving towards a Strategic Advisory Approach on the Introduction of Results-oriented Budgeting: What Can Development Cooperation Learn from OECD Experiences?

Aim of this study is to make use of the findings from OECD countries‟ reform experiences for the development cooperation context. The reform experiences examined in this study show that even in OECD countries reforms were difficult and expensive to implement. This demonstrates that is important to be realistic about what partner countries can accomplish. This study gives an idea on how to reduce the complexity of introducing results-oriented budgeting, highlighting two ways of doing so: On the one hand it shows that the introduction of results-oriented budgeting includes different building blocks of reform, and that it is not always necessary to implement the complete reform programme in order to achieve certain objectives. In cases where countries introduce the complete reform package a reduction of reform complexity is also possible by reducing the number of programmes and by simplifying performance indicators.
Source: GIZ, 2011



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