The paper discusses economic transition in Serbia, a country that has, until fairly recently, delayed more radical economic reforms and integration with the European Union. Since the change of the political regime in October 2000, a lot of progress has been achieved. Macroeconomic performance has greatly improved, there has been a substantial inflow of FDI, and the most important objectives of the transition to market economy have been carried forward at accelerated speed. Thought the Serbian economy is presently facing important challenges, the most critical, however, are the political issues. Because of Serbia’s non-compliance with EU political conditionality, negotiations with the EU on a Stabilisation and Association Agreement have been blocked in May 2006; the final status of Kosovo is bound to create further problems on both sides; while the prospects of EU membership, under present conditions of high uncertainty regarding future EU enlargements, may not be a very strong incentive to carry forward the necessary economic (and political) reforms. The paper critically evaluates these various issues of Serbia’s transition, which in many ways has been unique
