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. Last Updated: 07/27/2016

Djindjic's Death Hits Serbian Economy

BELGRADE, Serbia-Montenegro -- The assassination of Serbian Prime Minister Zoran Djindjic is likely to slow investment and economic growth in the country, analysts and a minister said, but foreign investors made clear they would not pull out.

Analysts said the murder of Djindjic in central Belgrade on Wednesday was likely to unnerve investors, reduce interest in upcoming sell-offs and make state firms cheaper, hurting growth.

The reformist cabinet, vowing to push on with economic reform measures, has imposed a state of emergency and declared war on a powerful criminal gang it said was behind the murder.

The death of Djindjic, a pro-Western reformer who played a key role in the ouster of Slobodan Milosevic in 2000, left Serbia with neither a prime minister nor an elected president.

The government had based its 5 percent economic growth forecast for 2003 partly on $1 billion in foreign investment and privatization receipts, which may now be in doubt as investors reassess risk and stability in Serbia.

Foreign Minister Goran Svilanovic told radio B92 that the growth forecast would have to be cut to around 2 percent, "due to the situation after the assassination".

Christoph Greussing, director of HVB bank in Belgrade and chairman of the Foreign Investor Council, said Serbia had lost a man who had tried to push it closer to the European Union.

"Events like this always trigger certain concerns, but the council sees Serbia as still being in the hands of democratic forces. We remain committed to this market," Greussing said.

Vladimir Gligorov, a researcher at the Vienna Institute for International Economic Studies, or WIIW, said it may be hard for Serbia to find a substitute if foreign investments fall short.

"The five percent growth rate relied on a planned sale of [cellular operator] Mobtel and shares of [land line operator] Telekom Srbija bought back from Telecom Italia, two tobacco plants and [fuel chain] Beopetrol," he said.

He said the economy underperformed in January and February. "Even two percent growth could be an optimistic scenario."

An analyst, who asked not to be named, said Serbia's privatizations could slow down a lot. "For some time, Serbia will be perceived as a risky place for investors. It's a small market and they need not rush. I believe the price of companies offered for sale could also suffer."

Gligorov said instability could also mean less remittances from expatriate Serbs, money financing part of the trade gap.

Finance Minister Bozidar Djelic said the European Bank for Reconstruction and Development and the European Investment Bank would be in Belgrade next week to discuss future projects in Serbia.

"I am optimistic that the EU, the United States and Russia will go the extra mile for Serbia at this point in time. We need it and I am pretty sure they will respond," he said.

WIIW's Gligorov said Serbia now faced tough political choices. He said the outside world would welcome a quick lifting of the state of emergency, further democratization and the inclusion of all democratic groups in a new government.

"These moves should be followed by an election to verify popular support for reforms," he said