Transition towards a Market Economy in a Post-Conflict Context- The Case of Serbia

In 2001, Serbia presented a program that intended to move the country from a plan economy to a market economy. Prior reform, four overall objectives were set: restoring macroeconomic stability and balances, stimulating growth, creating a basis for sustainable supply response and investing in improved governance and effective institutions. The Serbian transition was based on the post Washington-consensus, which emphasises the importance of institutional building. In this study, I focus on the Serbian transition towards a market economy. Serbia has obtained control over the macroeconomic balances and is currently experiencing healthy growth figures. Per capita income is growing and the living standard has increased since transition initiated. However, five years into the transition, I conclude that the Serbian progress was sluggish due to a deficient legal framework, i.e. the lack of efficient protection of property rights. The effects are a private sector trapped with low skilled labour and low value production. The difficulties acquiring working capital has forced many private entrepreneurs to rely more on the informal sector than the formal one. Consequently, a major challenge for Serbia is to reintegrate the informal economy within the formal economy. Additionally, the political effects (i.e. the post war sentiments) have had a negative effect on reform and economic development