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Addressing Economic Challenges in Serbia: Strategies for Financial Access

Insights on Serbia's economic downturn, access to finance challenges, and government stimulus efforts. Learn about impediments, government initiatives, and project support for enhancing access to finance in the region.

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Addressing Economic Challenges in Serbia: Strategies for Financial Access

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  1. Regional Competitiveness Initiative: 4th Annual Regional Conference on Competitiveness and Economic GrowthAccess to FinanceSerbia

  2. Economic Conditions -Foreign Trade in January and February alone plummets 35% -Industrial Production down more than 20% with some sectors declining more than 40% -Unemployment, already high at 14-16%, expected to climb to more than 20% -GDP expected to fall 5-6% in 2009 -Currency losing ground though more recently signs of stability

  3. A Few Impediments to Access -No non-bank financial regulation in place -Substantial deposit outflows in 4th quarter 2008 and 1st quarter 2009 -Almost 60,000 companies presently have their accounts frozen. -Banks account for as much as 95% of financial intermediation in Serbia -High percentage of loans in Serbia indexed to FX leading to FX induced credit risk as currency fell.

  4. And a few more….. -Loan growth stalled and loan quality deteriorating -Banks still using the “cherry picking” strategy -Serbia well banked but risk management options remain rudimentary - Government programs for improving access helpful but still mired in bureaucracy

  5. Government Efforts to Stimulate Credit Completed/Underway • Increase of guaranties for savings • Arrangement with the IMF • Decrease of Current Public Expenditure/Wages • Loosening Monetary Policy • Targeted Fiscal Expansion Some Other Options • Further easing of monetary policy • Repayment of Government debt to suppliers to increase liquidity • Increase of Public Infrastructural Investments

  6. Government Stimulus Efforts Summary of the Financial Stimulus Package in Numbers (Billions of Dinars) (exchange rate 94 dinars/Euro June 11, 2009) Loans with government support: • Subsidized liquidity loans 40.0 • Investment loans with the participation of the fund 17.0 • Subsidized consumer loans 20.0 • Foreign credit lines 45.0 Support to the economy through Development Fund & Agencies: • Start up loans 3.10 • Development of companies in underdeveloped regions 2.49 • Promoting tourism 0.32 • Regular operations of Development Fund 6.20 • Exports through AOFI (Export Ins. & Financing Agency) 4.32 • Finance for factoring (through AOFI and SMEK) 1.73 • Insurance & guarantees (AOFI, SMEK, GF) 4.31 • Incentives to attract FDI 1.70 • National Employment Agency Programs 3.00 TOTAL 149.17

  7. Project Initiatives Supporting Access • Inventoried Grant Programs, Debt Capital Products, Government Programs and Private Equity firms in the country • Source/referrals of potential companies for PE firms with specific sector interest • Work with a few banks in targeted sectors where they have interests to expand their risk exposure (i.e. energy efficiency) • Limited firm level support to identify sources of working capital

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