We work towards building more competitive and sustainable economies in Serbia as well as in all of those other Western Balkans
In his interview for that magazine Diplomacy&Commerce Matteo Colangeli, EBRD Director for Western Balkans discussed the present state from the Serbian economy and EBRDs plans for Serbia and Western Balkans. He explained the value of economies that are run by greener energy systems and investments in digitalization. Next he said the Serbian economy indicates resilience over time of uncertainty.
EBRD invested well over a billion euros in the Western Balkans this past year, evenly spread between private and public sectors and across a total of 89 projects. Around 35% of the amount visited investments in environmental infrastructure, alternative energy, circular economy, and resource efficiency. A major landmark project in Serbia ended up being to build sanitary landfills and increase recycling, as well as investments in rolling out broadband in rural areas and upgrading irrigation facilities
What are the impressions of Serbia after working almost a year in the position from the Director from the EBRD Office for the Western Balkans and Serbia?
Serbia is a priority country for the Bank, consistently among our top ten in terms of business volume, and a country where we have ambitions to develop our presence and activities further. As such, it is an honour for me to be leading our team in Belgrade. During my small amount of time in Serbia, I've been impressed by the resilience from the economy during the crisis and by the depth of ongoing investments in upgrading the nation's infrastructure. I believe you will find exciting opportunities for Serbia in the years ahead. At EBRD, we are committed to support our partners in the public and private sectors to make the most of them.
After you had been appointed for this position, you said that the EBRD's focus would be around the economic recovery within the post-pandemic period. However, since pandemic continues to be lasting longer than originally anticipated, what exactly are your current plans? Do you know the EBRD's plans in Serbia and also the region?
We work at building more competitive and sustainable economies in Serbia as well as in all of those other Western Balkans. Economies that are powered by greener energy systems, for efficient in the way they will use and recycle resources, and are inclusive in creating opportunities, particularly for younger generations. Supporting investments in digitalization will certainly be an essential enabling factor in reaching these objectives, as it is going to be nurturing the promising technology ecosystems that are developing in the region, especially in Serbia. But the overarching priority for EBRD over the Western Balkans is going to be accelerating saving money economy transition, both at the degree of infrastructure and energy systems as well as in terms of investments by the private sector.
We are dedicated to continue working with authorities and business communities across the region to provide on this agenda, by making available finance and know how. Within the years ahead, I expect an increasing share of our public sector investments to be in environmental infrastructure, railways, and energy efficiency. We also wish to expand our direct financings to corporates, both local entrepreneurs and foreign direct investors, again having a view to greening their businesses. And, obviously, we will work to scale up renewable energy, including by creating supportive regulatory frameworks and competitive processes to allocate capacities and provide the most effective outcomes for that energy systems of the region.
Do you believe the Serbian government is coping well with the challenges posed by the pandemic?
The Serbian authorities adopted a range of measures over the past 2 yrs to assist shield the economy in the impact from the pandemic. In my view, the support was timely, broad and sizeable, delivering strong support to businesses and households. This softened the economical contraction in 2023 and supported the robust recovery this past year. Importantly, authorities also raised public capital investments, included in the response to the crisis. Addressing infrastructure gaps not just supports the immediate recovery but also helps raise the longer-term growth of the economy. Moving forward, the policy mix will have to remain fine-tuned to mirror the changing economic realities, for example narrower fiscal space, and strengthen the resilience from the economy to future shocks, but also to consider advantage of transformational trends which have come to the forefront during the pandemic like the digitalisation and the re-organisation of global supply chains.
What is the current state from the Serbian economy?
The economy indicates resilience over time of uncertainty, recording stronger than initially expected output growth over the last year carrying out a relatively mild contraction in 2023. Recovery continues to be broad-based, led by activity in domestic trade, construction and manufacturing sectors. Private consumption has additionally been recovering strongly and so have investments and exports. Overall, the economical output keeps growing at a robust rate. However, Serbia is not safe from global vulnerabilities such as elevated inflation, tightening of the fiscal space on the back of large interventions and uncertainty associated with the near future dynamics from the pandemic and external environment conditions.
What is Serbia's position in relation to other Western Balkan countries?
Serbia has been among the countries in the area that weathered the pandemic better, by virtue of the dwelling of its economy and also the effective measures deployed through the authorities. What really stands out, in my view, is the country's continuing success in attracting foreign direct investment, with Serbia accounting for the lion share of the Western Balkans total, particularly in manufacturing and services. I believe Serbia and also the entire region are to benefit materially from closer economic integration and from better transport connectivity among the countries. The investments Serbia is making in roads and rail are very important in this respect. On a broader level, the region's approximation to the EU remains the main catalyst for economic development and better living standards. Serbia's opening of negotiations on new EU accession chapters last year is a noteworthy success and positive news for the entire region.
Could you know us more about the EBRD’s investments in the Western Balkans in 2023?
We invested more than a billion euros within the Western Balkans last year, evenly spread between public and private sectors and across as many as 89 projects. Around 35% of this amount went to investments in environmental infrastructure, alternative energy, circular economy, and resource efficiency. The marked increase in green investments relative to 2023 underscores our resolve for the region's green economy transition, which remains our first priority. The year was seen as a a number of landmark projects. In Serbia, such as a major regional waste management program to build sanitary landfills and increase recycling, in addition to investments in rolling out broadband in rural areas and upgrading irrigation facilities.
In Albania, we financed a cutting-edge floating solar power plant, as well supported the resilience from the financial and sectors. We continued to aid major road links in Bosnia and Herzegovina, Montenegro and North Macedonia, in addition to much needed environmental infrastructure in Kosovo. Across the region, we strengthened our network of green cities with a number of projects in energy efficiency, district heating, and local transport. The majority of our business in the private sector continued to be primarily channelled through local banks, including with risk sharing, trade finance, and facilities supporting green investments by SMEs, residential energy efficiency, and access to finance for female entrepreneurs. The EBRD's cumulative investments in the area reached nearly 15.3 billion euros up to now.
What is your forecast for that Serbian economy?
Our current forecast projects 6.5% GDP development in 2023 around the back of the consistently strong recovery throughout the year. We expect economic growth to moderate to 4.3% in 2023, moving closer towards the long-term rate of growth. Foreign direct investments happen to be robust previously decade, which bodes well for future growth, and risks to the forecast remain balanced. Overall, Serbia is within a great place to advance the structural reforms which would boost long-term growth and ensure its sustainability. Included in this are lowering the economy's energy intensity and enhancing the share of renewables, in addition to accelerating digitalization and deepening use of finance for business through capital markets development. Continuing to improve the governance of state-owned enterprises would also support resource efficiency and rising productivity throughout the economy.
