Serbia's economy is out of balance and performing below its potential. Since the post, Yugoslavian transition, Serbia's economy has been running on one engine, the non-tradable sector and expansion of domestic demand. This was financed with ample capital inflows, which were sharply reduced since 2008 as the global economic crisis escalated. While this consumption-led growth produced some improvements in living standards, it was not sustainable and created hardly any formal jobs. This explains why Serbia's job market is also out of balance. Less than half of the working-age population has a job at all, and among those that are formally employed, almost half are employed in the public sector. This note identifies three priority areas and a set of specific measures which complement other important reforms, especially those related to improving the country's macroeconomic and fiscal position. The reforms will make it easier to invest, operate a business, and create jobs. The measures could be implemented within a relatively short period of time, since many of them build on the existing initiatives and address well identified problems. Priority area one, making it easier to operate businesses, by reducing excessive administrative burdens and making regulatory environment predictable
priority area two, making it easier to invest and expand business, by improving planning and construction permits procedures
and priority area three, making it viable to create formal sector jobs, by reducing labor market costs and rigidities.