Government of the
Office of the
THE E
AND ITS
Republic of Serbia
Prime Minister
CONOMIC CRISIS
IMPACT ON THE SERBIAN
ECONOMY
Framework of Measures
December 2008
The Economic Crisis and Its Impact on the Serbian Economy
Introductory remarks
Several months ago the financial crisis which gripped the USA and soon spilled over to
the European and other global markets, began with a sharp fall of real estate prices in the
USA followed by default in mortgage payments. It turned out that the loans were
inadequately insured to protect the creditors. Further developments showed that the
creditors have systemically underestimated the importance of the insurance quality by
issuing loans (not only mortgage loans) without sufficient guarantees. The creditors, who
did not include only banks and different investment and other funds, suffered losses. This
went on to have a ripple effect on small individual investors who have entrusted their
assets to investment professionals as well as on other investors who have invested their
funds in such a way. With the aggrivation of the financial crisis, the losses were
multiplying and they began to affect an increasing number of participants on the financial
market. Having transpired that the problem is of a system related nature, the crisis
gradually started to spill over from the financial to the industry sector.
Initially, the crisis of the industry manifested itself through the decline of demand. Apart
from the inability to collect claims which resulted in losses, in turn leading to market
liqudity decrease, a further decline in market liquidity was caused by a very conservative
approach when issuing new loans. Consequently, in addition to the construction business,
other industry branches too were faced with the demand slump which first led to the
economic growth slowdown and then to recession. At this moment it seems that the
automotive industry was most hard-hid which, in regu