16. Impact of COVID-19 in Serbia
The COVID-19 pandemic and its economic consequences have had a relatively moderate impact on Serbia’s population and economy so far. The authorities acted quickly to contain the virus during the first wave of the pandemic. They also mobilised sizeable fiscal resources to mitigate the impact of illness and strict confinement measures on people and firms. This chapter reviews the sources of vulnerability and resilience that determined the impact of the crisis and that will condition the path to recovery. While the economy weathered the pandemic better than originally projected, weaknesses in the labour market and the social protection system left parts of the population unprotected. Fiscal room for manoeuvre was pivotal in allowing Serbia to respond. The crisis has also put the spotlight on structural sources of vulnerability that should receive attention as the country prepares its development strategy for the future.
Serbia has experienced four waves of the pandemic. The first case of COVID-19 was reported on 6 March 2020 and the first death on 20 March. The virus progressed rapidly in Serbia: 60 days after the first registered case, there were more than 10 000 – the highest number in the region – and 38 registered deaths from COVID-19 per million inhabitants, compared to 13 in Albania, 53 in Bosnia and Herzegovina, 20 in Kosovo and 137 in North Macedonia. The economy suffered a second wave from early June to mid-September, a third wave from October to December 2020 with significantly higher incidence rates and a fourth wave from mid-February to end of April 2021 (Figure 16.1). As of 21 May 2021, the economy counts an accumulated 900 233 cases (or 103 254 per million inhabitants) and 8 649 registered deaths (or 992 per million inhabitants), which is the second-lowest mortality rate in the region (Figure 16.2). The fatality rate (0.99%) is the lowest compared to other Western Balkan economies. The official figures might underestimate the real human cost of the pandemic insofar as positive tests are required to classify a death as due to COVID-19.
Note: Serbia reported its first COVID-19-related case on 6 March 2020.
Source: Authors' calculation based on Our World in Data (2020[1]), Our World in Data website, https://ourworldindata.org/.
Note: Serbia reported its first COVID-19-related death on 20 March.
Source: Authors' calculation based on Our World in Data (2020[1]), Our World in Data website, https://ourworldindata.org/.
Serbia acted quickly to prevent the spread of the virus, but some measures triggered social tensions. The government declared a national state of emergency on 15 March 2020 and implemented a lockdown, prohibiting movement of citizens during the weekends and between 5:00 pm and 5:00 am on weekdays, with a total ban for senior citizens. Borders, public areas, parks and shopping malls were closed; grocery stores and pharmacies remained open. The measures were effective and led to about an 80% decrease in movements throughout Serbia with respect to February, before the first case was registered (Figure 16.3). The government lifted the curfew on 6 May but announced weekend curfews on 7 July because of the new wave of contagion. The new measures, however, triggered social tensions and were ultimately repealed. With the third wave, the government introduced a series of new measures limiting opening hours for certain businesses and implementing online classes for schoolchildren in grades 5 and above.
Notes: The chart shows the relative volume of requests for directions compared to a baseline volume on 13 January 2020, as recorded by Apple. Moreover, it shows, in chronological order, the first COVID-19-related case reported in Serbia (6 March), the date of implementation of the curfew (15 March), and the first stage of relaxation of the curfew (6 May).
Source: Authors’ elaboration based on Apple (2020[2]), Mobility Trends (dataset), www.apple.com/covid19/mobility.
Serbia has also stepped up its testing and vaccine capacity. It was conducting the second largest number of tests compared to the rest of the region (469 421 tests per million inhabitants by the latest available data) and was carrying out over 20 000 tests per day for most of early December 2020 (Figure 16.4). Enhancing the timely detection of new potential cases and hotspots is critical in order to strengthen the economy’s health resilience. With 28 people fully vaccinated per hundred inhabitants by the latest available data, vaccine capacity in Serbia by far the highest in the region and also strongly outpaces both the OECD and EU averages (Figure 16.5).
Notes: Data as of 7 January 2021. Costa Rica officially became an OECD Member on 25 May 2021, therefore it is not included in the OECD averages in the current report.
Source: Worldometer (2020[3]), “Coronavirus”, www.worldometers.info/coronavirus/.
Note: Last reported numbers are from May 2021.
Source: Worldometer (2020[3]), “Coronavirus”, www.worldometers.info/coronavirus/.
The government has taken a series of measures to mitigate the negative impact of the crisis on the economy (Table 16.1). The government provided private enterprises with loan guarantees and tax deferrals and distributed a special universal cash transfer of EUR 100 to each citizen. The total value of the fiscal package amounted to EUR 6 billion (12.7% of GDP) with EUR 4.0 billion in direct fiscal support and expenditures and EUR 2 billion in credit guarantees and grants. Further assistance came from the Council of Europe Development Bank (EUR 200 million loan), the World Bank (EUR 100 million loan) and the European Union (EUR 93 million financial support package).
Following a heavy recession during the first wave and lockdown, Serbia’s economy weathered the crisis relatively well with significant government support. After growing by 4.2% in 2019, GDP fell by 1% in real terms in 2020, according to estimates of the Statistical Office of the Republic of Serbia (SORS, 2021[7]). After falling by 0.6% in the first quarter of 2020, GDP contracted by 9.2% in the second quarter (in seasonally adjusted terms) after lockdown and containment measures were introduced, but recovered in the third and fourth quarters (by 7.2% and 2.2% respectively). Services sectors have been the most affected during the pandemic: leisure services fell by 14.6% in real terms during 2020, professional services and administration by 9%, and wholesale and retail trade, the second largest contributor to GDP, declined by 5.2%. Despite strong quarter-on-quarter recoveries, these services sectors could not make up for lost business during the first half of the year. Manufacturing production was expected to decline due to the disruption in supply chains (World Bank, 2020[8]). While industrial sectors, excluding construction, fell by 12% between the first and second quarter, they rebounded strongly and closed the year with a 0.4% growth over 2019. Construction, on the other hand, closed the year with a 5.1% fall in value added. The recovery of certain key sectors shows their resilience in the face of sizeable disruption: exports and imports both decreased by around 20% and consumption dropped by 7.2% in the second quarter of 2020 (World Bank, 2021[9]; SORS, 2020[10]).
A series of economic and social dimensions have made Serbia relatively vulnerable to COVID-19, while institutional weaknesses undermined the resilience of its policy response (Table 16.2). Considering pre-existing vulnerabilities can help policy makers to determine who will need help the most and to design and target policies accordingly as well as plan for the next crisis. Serbia’s health sector was relatively well equipped in terms of infrastructure to deal with the health impact of the pandemic. High unemployment and widespread informality already weaken Serbia’s economy and can slow down recovery. Moreover, they imply that a significant share of the population risked remaining without adequate health and social assistance. Exposure to foreign investors and trade could be another source of vulnerability, given how severely the virus hit Serbia’s main trade partners. The relative stability of the financial sector may become an asset for post-COVID-19 recovery. Low government effectiveness and the politicisation of the civil service may weaken the implementation capacity of the state.
Material well-being and social protection
People’s material well-being was expected to worsen with the COVID-19 crisis. The poverty headcount ratio (measured as USD 5.5 per person per day, 2011 PPP) was about 19.3% in 2019, compared to 2.9% in OECD economies. Its incidence varies greatly across the economy and is particularly high in Southern municipalities, where opportunities are lacking. Differences range between 4.8% in Novi Beograd in the Belgrade Region (Beogradski Region) to 66.1% in Tutin in the Šumadija and Western Serbia Region (Region Šumadije i Zapadne Srbije) (see the People section in Chapter 17).
While the overall labour market proved resilient to the first shock, the crisis could have an impact on some groups, especially young. The unemployment rate declined to 10.4% of the labour force in 2019 – the lowest level in the last decade – and employment increased to 49% of the working age population. The unemployment rate for people under age 25 was about three times higher than for the overall labour force and amounted to 27.5% of the young population that is active in the labour market. Labour market conditions may worsen as COVID-19 impacts on the economy, fuelling future unemployment. On 13 August, the government adopted a regulation to implement a youth employment programme, “My first salary”, which includes new measures (worth RSD 2 billion, or EUR 16 million, and 0.04% of GDP) to stimulate youth employment through wage subsidies, recruitment support and additional training programmes for those seeking employment.
A drop in personal remittances could lead to income losses for some households. About 10% of the workforce lives abroad, and their remittances accounted for about 8.2% of GDP in 2019, compared to 0.3% of GDP in OECD economies in 2018. Potential further drop in remittances, could erode the income of a significant share of households and lead to a further decrease in consumption (World Bank, 2020[8]). From January to May 2020, remittances fell by 24% compared to the same period in 2019 (OECD, 2020[5]).
Inadequate social assistance limits its ability to act as an automatic stabiliser. Social protection expenditure in Serbia is concentrated in pensions, while means-tested social assistance has very limited coverage among the poor: Financial Social Assistance (FSA), the main income support programme, covers less than 6% of the poor population. At the same time, relatively high levels of labour informality (around 20%) and low labour market participation hinder the impact of unemployment insurance and extraordinary support to businesses as stabilising mechanisms. Social insurance measures were introduced as a response, including a one-off cash payment to pensioners and extensions in unemployment insurance coverage. However, the largest measure was a EUR 100 grant distributed to all adult citizens. The universal nature of the grant ensured that it circumvented the lack of adequate targeting mechanisms for reaching those in need and that it could do so quickly. However, this came at the significant cost of about 1.3% of GDP. Future income support programmes will need to be better targeted so as to more efficiently utilise Serbia’s shrinking fiscal space (UN/UNDP, 2020[21]).
Health and non-material well-being
The health sector is relatively resilient to COVID-19, but the outlook is uncertain. Spending on health care accounts for 8.5% of GDP, higher than the average in the rest of the region (7.5%) but lower than the OECD average (12.6%). The number of physicians and hospital beds relative to the population is in line with the OECD average and above that of most regional peers. However, staffing remains a concern. Qualified medical staff have migrated to Europe in the recent past, attracted by higher salaries. According to some estimations, over 10 000 doctors left Serbia in the past 20 years, and the health system is lacking 3 500 doctors and 8 000 nurses (Harris and AFP, 2020[22]; N1 News, 2018[23]). While access to health care is relatively equal, people in sparsely populated areas and those with lower incomes report higher unmet medical needs, and frequent evasion of health insurance contributions by employers prevent affected workers from exercising their right to health care (see the People section in Chapter 17). This deficit undermines Serbia’s health response to the COVID-19 crisis.
Other, non-material aspects of well-being are affected by the crisis. Living conditions at home, where most people were asked to stay, are less than ideal for some: one-third of households in Serbia lack high-speed Internet, making teleworking and home-schooling difficult. Quality of life is also about people’s relationships, which can provide a vital lifeline during crises and social distancing. Yet, one in ten citizens of Serbia say that they have no relatives or friends they can count on for help in times of need. Even before the COVID-19 pandemic, life satisfaction was lower than in the average OECD economy. The considerable risks of social isolation and loneliness need to be addressed, for both physical and mental health, by policy measures (for instance, through regular check-ins by social services, civil society and volunteers) and the promotion of digital technologies for connecting people with each other and with public services (OECD, 2020[24]).
Women are particularly exposed to the collateral effects of COVID-19. As in other economies, loss of employment and lockdown conditions in Serbia raised concerns about increased exposure to the risk of domestic violence during the first wave of the COVID-19 crisis (Bami, 2020[25]; OECD, 2020[26]). This led to calls from the Commissioner for the Protection of Equality and civil society organisations to ensure that protective measures were in place (Autonomous Women’s Center, 2020[27]; Commissionner for the Protection of Equality, 2020[28]). Even before the crisis, domestic abuse existed and needed better enforcement of existing legislation, including upping the provision of shelters and issuing emergency protection orders more promptly (see the People section in Chapter 17). Comparable surveys suggest a 24% lifetime prevalence of domestic violence against women pre-COVID, which is in line with the OECD average, but other studies have found that up to 45% of women who have or have had an intimate partner experienced intimate partner violence (including psychological violence) (OECD, 2019[29]; OSCE, 2019[30]). Women are affected in other ways too. They make up the majority of the healthcare workforce, which has exposed them to greater risk of infection. At the same time, women shouldered much of the burden at home, given school closures and longstanding gender inequalities in unpaid work (see the People section in Chapter 17).
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