Because of its difficult startingposition in transitioning to a market economy, so farmacroeconomic policy in Serbia has mainly been concernedwith achieving stability. At the start of its transition in2001, Serbia was practically bankrupt, burdened with oldoverdue debt and huge arrears in budgetary payments,especially pensions. At the end of 2000, public debt was 175percent of GDP and external debt was 128 percent. In both2000 and 2001, inflation was over 80 percent. High inflationand external imbalances were the main concerns all the waythrough the global financial crisis (GFC). The GFC (as wellas external shocks) brought multiple recessions between 2009and 2014, and a major widening of the fiscal deficit. Since2014, the focus has been on consolidating public finances,in addition to keeping inflation low. While macroeconomicstability is a necessary precondition for growth, thequestion is whether Serbia can do more to create apro-growth environment. Serbia has succeeded in keepinginflation low over recent years; the current account deficit(CAD) is now low enough to be manageable and is almostentirely financed by non-debt-creating flows; large fiscaldeficits have been converted to a surplus; and public debtis heading downward. However, growth is still meager. Toensure that the Serbian economy grows more quickly, thefocus should be on increasing investment—both private and public.
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