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On behalf of the Serbian Association of Economists we are pleased to invite you to the jubilee
XXX Kopaonik Business Forum

The Kopaonik Business Forum (KBF) is a high-profile event committed to improving the performance of the Serbian economy through analytical contributions and dialogue between major relevant stakeholders. For more than a decade the event has enjoyed the conceptual patronage of the Prime Minister of the Republic of Serbia and attracted a significant number of participants from the region. Partnership with MasterCard company secures additional support in achieving greater visibility and enhancing the quality of this important event. Recently, the Forum has been gathering on average more than thousand participants annually, including heads of state, prime ministers and ministers, high representatives of regulatory bodies, representatives of international financial institutions, respectable scholars, diplomats, business practitioners, and media.

As usual, this year event is organized through plenary sessions, panel discussions, special events, and peer-to-peer sessions.  Our exceptional roster includes close to two hundred speakers from academia (mostly economics, business management, and ICT), politics, finance, and business. Flagship thematic studies from IFIs will be presented again at the KBF along with new academic and policy papers by leading researchers and scholars in topical fields. The KBF continues to provide a unique opportunity for participants to meet and discuss relevant issues. The title of this year’s annual meeting is:
Pursuing resilient economy in uncertain times:
Major challenges for serbia and the western balkans

KBF 2023 is again a four-day event.

Day Zero, Sunday March 5, is dedicated to macroeconomic analysis of recent developments in Serbia and an outlook for the Western Balkan region in year 2022. Day Zero will also feature presentation on company reputation (KBF index) and the status of the Digital Serbia Initiative. Day OneMonday March 6, will open with keynote addresses by the Serbian Governor of the Central Bank, and the Minister of Finance devoted to major macroeconomic (monetary and fiscal) policy developments in Serbia, followed by a Special Guest Speaker. Afternoon sessions will start with a panel devoted to the future of the EU and the Western Balkans featuring leading diplomats and geopolitical scholars. Day One afternoon will be saturated additionally with topical panels on: finance for circular economy, advanced digital cooperation, economic agenda for open Balkan, cashless economy, and company readiness for generation “Z”. Late afternoon and evening sessions will cover topics such as: Western Balkans sustainable development network, automotive industry, insurance industry, and the resilience of Serbian economy (as seen by investors). Day Two, Tuesday March 7, will start with panels on energy security, connectivity agenda, and digital agenda (safe digital future of credit institutions, and digitalization of public services). It will continue with panels on human capital development, bio-tech revolution, women in business, agriculture in globalized world, education as a base for competence, and e-mobility. Evening panels will cover the banking sector, efficiency of tax administration, the role of tourism in improving country image and attracting FDI, and circular economy as innovation. The Day Two will conclude with a hard-talk interview with Philip Zepter. Day Three, Wednesday March 8, will start with a plenary session contributions from WHO and UNICEF representatives, and continue with panels on social cohesion issues, children friendly policies and business practices, and healthcare realities and transformation issues. The KBF will conclude with an interview with Prime Minister Ana Brnabić, and closing remarks by the President of SES.

The KBF will host Indermit Gill as a special guest speaker. He is a Chief Economist of the World Bank Group and Senior Vice President for Development Economics with strong leadership, academic excellence, expertise, and practical experience working with governments on macroeconomic imbalances, growth, poverty, institutions, conflict, and climate change.
This year’s event takes place in an exceptionally complex geopolitical situation. Early vibrant 2021 economic recovery from the Pandemic crisis has been interrupted abruptly by the shock of war in Europe (Russian aggression on Ukraine). The war triggered a deep energy crisis affecting not only energy prices, but also food and all other prices, production value chains, trade flows, consumer welfare, investor’s confidence, financial markets, and exchange rate stability. This already produced significantly lower level of economic activity this year which will slow down further in 2023 due to delayed adjustment to new global energy reality and inflationary pressures. This time around, the brunt of growth adjustment comes from advanced economies, Euro area in particular.

Global Economic Environment:

The global post-pandemic economic recovery recorded in 2021 (of 6 percent GDP growth) of has been reversed in 2022 to 3.2 percent. Down from 4.9 percent projected early in the year. The slowdown is attributed to four main factors:
  • the Russian invasion of Ukraine;
  • the cost of living crisis caused by persistent and broadening inflation pressures;
  • inadequate and overly restrictive fiscal and monetary policy response to the apparent stagflation (suppressed growth and inflationary pressures) and
  • the slowdown of economic growth in China and the US, and contraction in major EU economies (Germany and Italy).
Global growth projection for 2023 has been lowered to 2.7%, 0.2 percentage points below the July forecast and 0.9 percent below April forecast. In addition to further weakening growth prospects, the 2023 slowdown will be broad-based, both geographically and sector-wise. The largest economies: the US, China and the Euro area will continue to stall this year or the next. For many people 2023 will feel more like a recession than slower recovery.
In the United States, the tightening of monetary and financial conditions will slow growth to 1 percent in 2023. China’s growth forecast for next year has been lowered to 4.4 percent due to a weakening property sector, continued lockdowns and limited scope for export growth on a global scale.
The growth slowdown will be most pronounced in the Euro area where the energy crisis caused by the war will continue to disrupt production chains and consumer welfare, create inflationary pressures and, thus, reduce growth from 3.2 percent this year to mere 0.5 percent in 2023. Actually, an economic contraction is expected in Germany and Italy (-0.5 and -0.3 percent). Almost everywhere in the world, rapidly rising food and energy prices are reducing real incomes and causing serious hardships for vulnerable households.
Despite economic slowdown, inflation pressures are proving to be broader and more persistent than anticipated. Global inflation is now expected to peak at 9.5 percent in the third quarter of 2022 before decelerating to 4.1 percent by 2024. Inflation is also broadening beyond food and energy. Global core inflation rose from an annualized monthly inflation of 4.2 percent at the end of 2021 to 6.7 percent in July 2022.
Downside risks remain elevated and policy trade-off are becoming hugely challenging in an emerging stagflation environment. The risks of monetary fiscal or financial policy miss-calibration have risen sharply at the time of high uncertainty and growing fragility. Global financial conditions could continue to deteriorate and the Dollar strengthening could further contribute to turmoil in the financial markets throughout.
Inflation pressures may yet again prove more persistent than expected especially if the labor markets remain extremely tight preventing real wage adjustment.
Finally, the war in Ukraine is still raging and further escalation can exacerbate the energy crisis, affect trade flows and food (grain) balance on a global scale.
IMF’s October WEO report presents a risk assessment around baseline projections. With 25 percent probability, global growth next year could slow down from 2.7 to 2 percent, a historically low level in the post-1970 period.
If many of the identified risks materialize, global growth in 2023 would decline even more to 1.1 percent, implying a quasi-stagnant income per capita next year. The likelihood of such adverse scenario would be 10-15 percent.
Increasing price pressures remain the most immediate threat to current and future prosperity by squeezing real incomes and undermining macroeconomic stability. Central banks must be focused on restoring price stability, by adequate policy tightening. There are risks of both under and over tightening.
Under-tightening would further entrench the inflation process, erode the credibility of central banks and de-anchor inflation expectations. As history repeatedly teaches us, this would only increase the eventual cost of bringing inflation under control.
Over-tightening could push the global economy into un-necessarily harsh recession and financial markets may struggle to adapt to a rapid pace of tightening.
The cost of policy mistakes are high and asymmetric. The hard won credibility of independent central banks in achieving and sustaining macroeconomic stability would be undermined by reemergence of persistent inflation. IMF sends a strong signal that central banks around the world need to keep a steady hand with monetary policy firmly focused on taming inflation.
Furthermore, an appropriate and coordinated fiscal response to the cost of living and energy crisis is necessary for a successful stabilization effort. Appropriate fiscal response should observe the following sound principles confirmed in practice.
  • Uncoordinated fiscal policy could prolong inflation and cause serious financial instability;
  • Fiscal policy responses to energy crisis must be carefully selected and scaled. Given the geopolitical realignment of energy supply in the wake of the war, the energy crisis (in Europe) does not appear to be a transitory shock but rather a broad and permanent change. Price signals play a crucial role in curbing energy demand and stimulating supply in the medium run. Price controls, untargeted subsidies and export banns are fiscally costly, lead to access demand, undersupply, misallocation and rationing. They rarely work in practice. Fiscal policy should instead aim to protect the most vulnerable through targeted and temporary measures (policies, interventions, subsidies).
  • Fiscal policies can help economies deal with a more volatile environment by providing incentives for investment in productive capacity, human capital, digitalization, green energy, and supply chain diversification. Expanding these can make economies more resilient when the next crisis occurs.
Strong Dollar represents a major challenge. So far, the strongest Dollar since the start of the millennium seems to be driven mostly by fundamental forces (the tight US monetary policy, the energy crisis, and the investors’ perceptions). IMF advice is to:
  • let the exchange rates adjust and conserve valuable foreign exchange reserves and build liquidity buffers (by requesting inter alia precautionary instruments from the Fund) for when the financial conditions really worsen.
  • minimize the impact of future turmoil through a combination of pre-emptive macro-prudential and capital flow measures where appropriate in line with integrated policy framework.
  • prepare for orderly debt restructuring through the G20 common framework as too many low-income countries are close to debt-distress and action is urgently needed to avert a wave of sovereign debt crisis.
Global economic picture would not be complete without mentioning the need to make progress on climate policies that, together with macro-policy issues, debt resolution, and other targeted global issues, would demonstrate that strengthened cooperation can achieve progress for all and help to overcome geo-economic fragmentation.
European Economic Environment
Russian invasion of and protracted war in Ukraine has triggered a major energy crisis and disrupted European economies more than any other region in the World. Huge increases in energy prices have eroded household incomes, threatened their welfare, and brought production costs to the breaking point despite fiscal stimulus handed by governments during and post Pandemic. Growth was further choked by tight monetary policy launched by ECB and central banks of other countries aimed at taming inflation pressures. To complete the bleak picture of recent developments, external environment for European exports has also weakened.
Against this backdrop, IMF’s October 2022 Regional Europe report concluded that the European outlook has darkened considerably, with growth set to slow down sharply and inflation to remain elevated. Output growth is now forecast to fall from 3.2 to 0.6 percent in advanced and from 4.3 to 1.1 percent in emerging European economies, implying a further downward revision from April and July estimates. Predictably, output losses will be very large in the conflict countries.
Headline inflation is projected to decline from 8.3 to 6.2 percent in advanced European economies which is still well above central bank target rates. Projected headline inflation rates for emerging European economies are 4-5 percentage points higher and follow a similar pattern leading to 11.8 percent average inflation rate forecast for 2023.
The risk of stagflation pressures continues to increase with accumulation of key downside risks on growth and upside risks on core inflation. IMF warns that if technical recessions (defined as two quarters of negative GDP growth) projected in parts of Europe materialize in the coming months, the whole continent may be pushed into a deeper recession with increasing negative multiplier effects through production chains, trade, and price spillovers. Key risk (trigger) in that regard would be further disruption to energy supplies combined with a cold winter and recessionary global environment.
On the other end, the risk of entrenched inflation may become a problem in the presence of under-tightening of monetary and fiscal policy which may de-anchor medium-term inflation expectations and trigger wage-price feedback loop. The IMF warns that the cost-of-living crisis may give rise to social pressures for a more expansionary fiscal stance that could, in turn, force central banks to further tighten monetary policy and put additional pressure on growth. This could exacerbate the problem of dealing with inflationary pressures in the presence of weak growth and declining competitiveness.
Severe trade-offs and tough policy choices await European policy makers. In the short run, with inflation rates well above target and sufficiently resilient labor markets, central banks should continue raising policy rates to fight the predominant upside risks to (core) inflation, despite some downside pressure on growth. For advanced economies, a reasonably tight monetary policy stance will likely be needed in 2023. An even tighter stance is generally warranted in most emerging European economies, where inflation expectations can be awakened and nominal wage growth could be higher.
Fiscal policy will have a formidable task of helping monetary policy fight inflation while rebuilding fiscal space and ameliorating the extraordinary energy price shock. Fiscal consolidation in 2023 should be calibrated in line with countries fiscal space needs, degree of vulnerability to tighter financial conditions, and cyclical positions, especially in emerging European economies. Some degrees of freedom in implementing fiscal consolidation program may be appropriate to allow governments to render targeted support to vulnerable households and viable firms through the energy crisis, while preserving sound price signals that foster energy savings and energy sector restructuring.
Macro-prudential policy settings appear adequate to monitor and stress-test banks’ risk exposures to vulnerable households and firms affected by deteriorating growth prospects, higher energy prices, and tighter financial conditions.
Continued implementation of reforms that enhance productivity, relieve supply constraints in energy and labor markets, and expand economic capacity (such as Next Generation EU programs) are essential to raising growth and easing price pressures over the medium term, while also ensuring energy security, accelerating the green transition, and countering adverse demographic trends.
Western Balkans Regional Economic Environment:
The recent World Bank Economic Report on Western Balkans (WB) firmly states that the region continues to be adversely affected by turbulent and unpredictable external environment, placing households, firms, and governments under acute stress. The successful 2021 post-COVID recovery has been interrupted by a new combination of challenges triggered by the war in Ukraine. The resulting sharp increase in energy and food prices, slowdown in global and regional growth and trade, and disruption of supply chains is weighing heavily on economic performance of the WB economies.
Initially, the growth momentum established in 2021 carried over into 2022 and produced positive results in the first two quarters of this year. Key drivers of WB growth were private consumption (based on rising wages, remittances, and new private loans), investment, and exports.
As economic disruptions deepened and price increases materialized, the key growth drivers quickly evaporated. Real incomes and consumer demand slowed down, investor confidence became subdued, and terms of trade worsened. The growth rates slowed down to 3.4 percent and current account balance (CAB) widened to -8.7 percent for the year. Monetary tightening will put further pressure on growth which is expected to further decline to 2.8 percent in 2023 before marginally recovering to 3.0 percent in 2024. CAB is expected to improve and record smaller deficits in 2023 (-8.3 percent) and 2024 (-7.1 percent) albeit significantly above the 2021 result due to a permanent worsening of the terms of trade.
Building on 2021 and early-2022 economic performance, employment levels reached historical highs in several WB countries by mid-2022. The average employment rate reached 46 percent, with all sectors contributing new jobs led by services (including tourism).
At the same time, the unemployment rate has declined to historic low rate of 13.5 percent. Data suggest that new jobs have benefited vulnerable groups, increased youth employment and women participation in the labor force. As a result, poverty has continued to decline by 1 percentage point in 2022, but higher inflation rates may reduce real incomes and consumption, and pose risks to poverty reduction.
The WB report warns that higher food and energy prices may affect more vulnerable groups as they tend to spend a larger share of their incomes on food and heating and have fewer coping mechanisms to maintain purchasing power. Targeted government support would, thus, be essential to avoid a possible 13-percent increase in the number of the poor in the region, according to the World Bank simulation.
These and other fiscal spending pressures following the energy and food price shocks have largely offset revenue over-performance owed to higher inflation and halted fiscal consolidation. The average fiscal deficit for the WB region in 2022 is expected to increase by 0.4 percentage points as a share of GDP compared to in 2021. More specifically, while high inflation contributed to higher nominal revenues, especially from indirect taxes, public expenditure also increased significantly on recurrent expenditures (energy inputs) and social programs. All Western Balkan countries have adopted policies to mitigate the impact of inflation on the most vulnerable households, but the fiscal impact of the energy price shock has been most significant in energy-importing countries. These numbers do not include open and hidden contingent liabilities incurred by the utility companies which will affect the future level of public debt.
Presently, public and publicly guaranteed debt is expected to decline from
56.4 percent in 2021 to 52.7 percent of GDP in 2022 and stay at that level in 2023-2024, but these numbers may have to be revised upwards to include new contingent liabilities. The cost of external borrowing is also increasing as a result of tight financing conditions driven by strong policy of advanced economies to tame inflationary pressures. Based on the WB report, yields on outstanding Eurobonds issued by Western Balkan countries widened noticeably in 2022, with some coming close to 10 percent.
During 2022 inflation in the WB region increased due to both supply and demand side factors and is expected to average 10.9 percent this year (with food price increases as high as 25 percent in some countries) before declining to 6.4 percent in 2023 and 3.0 percent in 2024.
Financial sector remained stable thus far (with 10.2 percent loan growth, declining share of NPLs and strong capital adequacy) but will face challenges going forward from higher inflation and widespread economic risks faced by households and firms.
The WB region is headed for another storm composed of supply and demand shocks affecting both global and regional supply chains, keeping inflation pressures high, reducing real incomes, and dampening consumer and investor confidence. Additional pressures will continue to come from the recession bound Eurozone, a key destination for WB exports, and the main source of direct investment and remittances. Finding the right balance between policies aimed at taming inflation and promoting growth, while providing targeted support to the poor and vulnerable, and addressing structural issues, will be a formidable task.
WB report emphasizes that, in the short term, governments should tighten monetary policy and prioritize fiscal support to the vulnerable, relying on well targeted and time-bound interventions to minimize fiscal risks. Medium term interventions should switch to promoting growth by removing barriers to competition, providing incentives for efficient investment and re-investment of profits, better (re-)training and education, and raise standards of governance (including through digitalization).
In parallel, WB countries should accelerate the green transition, particularly in electricity generation: “The transition towards a low-carbon, environmentally sustainable economy is not only good for longer-term growth, but also as a response to the current crisis.”
Serbia: Pursuing Resilient Economy in Uncertain Times

Recent Economic Developments: Serbian economy followed a similar pattern already identified for the WB region. Strong post-COVID revival in 2021 produced high growth rates that carried over into 2022. This is best seen through quarterly GDP growth rates that decelerated from 13.8 percent in Q2-2021 to around 7.5 percent during the last two quarters of 2021. The growth momentum produced 4.2 and 3.8 percent growth rates in the first two quarters of 2022 before succumbing to negative shocks triggered by the war and global disruptions.
During the first half of the year, the main source of growth was private consumption and, to a lesser extent, investment; labor markets improved, employment rate reached 50.9, unemployment declined to 8.9 percent and nominal wages increased 13.5 percent (16.3 percent in private sector and 7.9 percent in public sector). Exports grew almost 20 percent but so did imports (22.3 percent) due to energy price increases. General government budget recorded a small surplus (0.3 percent of GDP) based on stronger revenue performance.
The second half of the year represents a stark contrast marked by a broad-based downturn. GDP growth decelerated substantially to 1.0 percent in Q3, leading to an annual growth rate now estimated at 2.5 percent. Current account deficit widened to 9 percent of GDP, and inflation increased sharply. The annual average consumer price inflation (CPI) is estimated at over 12 percent, with signs of possible acceleration given that the end of period CPI inflation rate is estimated at 15.8 percent). Fiscal deficit is expected to be 3.8 percent of GDP.
The NBS increased its policy rate to 3.5 percent in September and maintained a stable exchange rate vis-à-vis the Euro throughout the year. Further on, during Q4, policy rate has been increased three more times, reaching the level of 5 percent at the year end. The banking sector performance remained robust with a low share of NPLs and solid credit growth (with large share going to SOEs hit by energy prices and the economic downturn).
The outlook for 2023 has been severely affected by the worsening global and regional economic situation described earlier. Growth projections for the next year have now been further reduced to 2.3 percent (from 2.5 percent used for budget preparation). Less than a year ago medium-term GDP growth projections were centered around 4-4.5 percent.
Fiscal deficit is projected at 3.3 percent of GDP in 2023, falling to 2.2 percent in 2024, and resuming earlier long-term deficit targets of around 1.3-1.5 percent of GDP. Current account deficit is expected to follow a similar downward pattern: 8.4 percent deficit in 2023, 6.0 percent in 2024 and 5.3 percent in subsequent years.
CPI inflation is forecast to be 12.2 percent in 2023, and then gradually come down to around 5 percent 2024 and around 3 percent in later years.
Key Challenges in Pursuing Resilient Economy
The realism of these projections crucially depends on the short-term policy mix aimed at taming inflation, sustaining economic growth and protecting the poor and the vulnerable. In the medium run, the challenges are to initiate reforms and structural policies to successfully move Serbia to a positive economic outlook based on a more productive and resilient economy. In most cases policy advice presented in the above sections (on global economy, Europe, and WB region) are applicable to Serbia.
The main risk going forward is to mount a coordinated policy effort to stop inflation from becoming entrenched and prevent the de-anchoring of expectations as a base of monetary policy. There is a growing evidence that inflationary expectations (by households and companies) in Serbia are far stronger than in any other country in the WB region and have already reached 20 percent in mid-2022.
Additional potential sources of inflationary pressures may come from open and hidden contingent liabilities of public energy and utility companies, as has been demonstrated already in the revisions of the 2022 budget and new 2023 budget. This channel may be further loaded with future energy sector losses (i.e. new contingent liabilities) and direct fiscal losses if energy prices are controlled. Sound policy advice is to combine tight monetary policy with well targeted and time-bound fiscal support for the low income groups, while allowing energy prices to provide sound signals for restructuring the energy sector and achieving resilience in this very important area.
Quick stabilization policies are also critical to prevent the formation of wage-inflation spirals (indexation) which proved to be one of the most difficult aspects of inflation persistence in the past.
Once short-term policy objectives have been accomplished, the main task for Serbia is to raise economic growth potential by resuming structural reforms needed to reignite productivity growth, accelerate income convergence with the EU, and fully (and truly) embrace digital agenda, improved governance and green transition. It is important to stress that these reforms are not needed just as EU accession requirement, but represent a necessary basis for better performance and economic prosperity, a basis for sustainable green growth and true resilience to major future risks.
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In an era of global uncertainty, we would like to stress that the true spirit and tradition of the KBF is to promote bold ideas that can help us better understand the challenges and opportunities connected with sustainable development agenda. The aim of the KBF 2023 is to motivate all participants to understand and actively shape the emerging economic and business ecosystem striving to embark on an innovation-driven global economy based on universal mobility.

The Serbian Association of Economists, as the organizer of the KBF, strives to sustain a network of influential stakeholders from all relevant fields and structure regular interactions through debates, dialogues, and knowledge sharing. Our vision is to become a true force for a better Serbia by creating consensus on fertile and feasible ideas that could help to overcome persistent economic problems and form a foundation of a sustainable economy converging to European Union income levels and social welfare.

Again, the choice to participate in the KBF 2023 is entirely yours!

We stand ready to welcome you at the jubilee XXX Kopaonik Business Forum! Do come.

Programme Committee of the Kopaonik Business Forum