Economic Integration and Analysis of External Debt Position of Serbia

Serbia had, when started its process of European integration in 2000, relatively high level of external debt amounting to 132% of GDP. All liabilities were practically inherited Government external debt since private sector during the period before 2000 even did not have the opportunity to take credits abroad. After the regime was changed, significant part of the liabilities was written off. In that position, country was thirsty for new capital resources and private sector indebtedness rise was not surprising. Moreover, it was one of the preconditions for future economic development. Even Central Government was in position to take credits under relatively favourable conditions in order to finance infrastructure projects and support structural economic reforms. Unfortunately, after ten years of transition structural reforms did not performed and external debt continued to increase dynamically reaching at the end of 2010 disturbing 84.9% of GDP and 236.2% of total annual export. After the slight stagnation during the crisis, external debt continued its rise dominantly as a consequence of rising Government debt. Current situation should attract the attention of the economic policy makers. Further external debt increase may jeopardize macroeconomic stability as well as the process of economic integration since it is expected that European Union will carefully observe macroeconomic situation in potential member states, especially after the PIGS countries phenomenon.