Page 63 - Central & Southeast Outlook 2020

While the new government has already made moves to roll back some of the most investor-unfriendly policies of the last few PSD-led governments, its scope for action in the months before the next elections is limited.
The government’s possible attempts to achieve fiscal consolidation by means other than unpopular or electorally-sensitive “austerity” steps (cutting wages, curtailing public employment) namely by thorough reconsideration of the entire taxation system toward higher property and profit/dividend taxation already received an early warning from rating agency S&P that put the country on the rating watch negative list in December.
2.10 ​Politics - Serbia
Serbia is due to hold a general election at the end of March 2020​— the first regular general election in the country after three consecutive early votes, with the last one being held in 2016. Although President Aleksandar Vucic’s ruling Serbian Progressive Party (SNS) has been the largest party in the Serbian parliament for years, he has repeatedly resorted to snap elections to strengthen his position.
Currently, the SNS-led coalition has 131 seats in parliament, while another 34 MPs also support the government of Prime Minister Ana Brnabic.
The general election comes after months of protests against Vucic’s regime. At their peak, the protests gathered thousands of people. Despite that, for the moment the opposition does not seem to have a chance of winning the election. According to a poll released by local media in December, the SNS would gain 52% of the votes, way ahead of any opposition party. However, only 45% of Serbians would vote.
As it moves closer to EU accession, Serbia will have to deal with its issues with Kosovo, which unilaterally declared independence from Serbia in 2008. Normalisation of its relations with Pristina is a condition for Serbia to join the EU, but relations between the two deteriorated after Pristina imposed 100% tariffs on imports from Serbia and Bosnia & Herzegovina in 2018. Vucic claims to be ready to make compromises so that the two countries find a suitable solution, but it will be difficult to reach a settlement that is acceptable to both sides.
Since Vucic came to power, initially as prime minister and more recently as president, the country’s top priority has been EU accession. However, Vucic has balanced this with maintaining warm relations with Russia. Serbia is also the main recipient of Chinese investment in the Western Balkans.
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