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Serbia faces a bleak economic and demographic future if it fails to resolve the Kosovo conflict and does not join the EU, a new study by the Open Society Foundation in Serbia has warned.

Implementation of the Brussels Agreement on normalising relations would ensure far lower demographic and economic losses for Serbia than the scenario of not resolving relations, it adds – noting also that a widely mooted territorial swap would benefit Serbia to the tune of abut 90 million euros a year.

“Due to the improved economical climate and stabilisation of the political situation, the country’s credit rating would rise, providing easier access to financial capital,” the study said, stating that Serbia’s foreign debt would drop from an estimated 24 billion euros in 2017 to 14.8 billion by 2030.

According to the report, “Economic, Demographic and Social Effects of Different Scenarios of Normalised Relations Between Belgrade and Pristina”, Serbia faces worrying demographic problems, with the population potentially dropping dramatically by 2060.

If relations with Kosovo were normalised, it said, Serbia’s population by that year would be around 5.57 million, compared to only 3.96 million if a “status quo scenario“ is realised.

The status quo assumes that Belgrade and Pristina will not normalise relations, thus preventing Serbia from closing Chapter 35 in its EU negotiations, and so not becoming a member of the European club.

“Projected low growth rate of 1.9 per cent … combined with the growth of all forms of consumption, inevitably leads to a growth of inflation and depreciation of the dinar [national currency],” the study said.

It added that this scenario would not be sustainable in the long term, and would lead to a “dramatic decrease of foreign exchange reserves”.

A delay in Serbia’s EU ascension would lead to a drop of foreign direct investments from EU members and other developed countries, and a fall in living standards and Serbia’s credit rating, while unemployment rose, the study says.

The study also looks at widely talked about proposals for a territorial swap between Serbia and Kosovo, saying that if this was done, Serbia could expect a modest economic and demographic benefit.

Serbia’s annual GDP would increase by 90 million euros a year, if it swapped the mostly-Albanian municipality of Presevo for the mostly Serbian areas of Zvecan, Zubin Potok, Leposavic and northern Mitrovica in Kosovo, the study said.

“This exchange is the most favourable for Serbia for a number of reasons,” says the Open Society Foundation study. It does not enter into whether Kosovo would accept such an exchange, however.

Read more:

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